Question 1

The main reason why a production possibilities frontier would have a concave shape is:

Accepted Answer

A)   because of decreasing opportunity costs
B)   because the rate at which one good can be substituted for another is fixed.
C)   because as a country specializes in one product, it must give up more of the other.
D)   because consumers face diminishing marginal returns in consumption.

Question 2

In economics, capital refers to:

Accepted Answer

A)   funds used by businesses to acquire goods and services.
B)   the process of raising money in the stock market.
C)   actual manufactured buildings and equipment used in the production process.
D)   anything that adds to human capital.

Question 3

Which of these items restricts our choices so that we must make tradeoffs?

Accepted Answer

A)   time and money
B)   money and personal preferences
C)   time and personal preferences
D)   time, money, and personal preferences

Question 4

Increased illegal immigration into the United States would best be represented with a production possibilities frontier (PPF)  as a:

Accepted Answer

A)   outward shift of the PPF.
B)   inward shift of the PPF.
C)   a movement from inside the PPF onto the PPF.
D)   a movement from a point on the PPF to a point inside the PPF.

Question 5

Opportunity cost applies only to personal purchasing decisions.

Accepted Answer

A) True 
 B)False

Question 6

When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible:

Accepted Answer

A)   production efficiency is achieved.
B)   allocative efficiency is achieved.
C)   production and allocative efficiency are achieved.
D)   inefficiency occurs.

Question 7

Comparative advantage exists when one country can produce:

Accepted Answer

A)   more of a good than can another country.
B)   less of a good than can another country.
C)   a good at a higher opportunity cost than another country.
D)   a good at a lower opportunity cost than another country.

Question 8

Most trade is based on specialization, according to:

Accepted Answer

A)   brand recognition advantage.
B)   location advantage.
C)   comparative advantage.
D)   absolute advantage.

Question 9

(Figure: PPF of Econia (a small nation) )  Looking at the production possibilities frontier (PPF)  of Econia, which point would have the greatest level of production inefficiency?

Accepted Answer

A)   production at point A
B)   production at point E
C)   production at point C
D)   production at point F

Question 10

Entrepreneurs combine land, labor, and capital to produce goods and services.

Accepted Answer

A) True 
 B)False

Question 11

What is one of the risks involved in complete specialization?

Accepted Answer

A)   Economic growth fosters poor moral standards.
B)   Specialization in agricultural products can lead to devastation due to rapid fluctuations in the weather.
C)   Educational opportunities may be narrowed.
D)   Living standards may decrease.

Question 12

_____ advantage exists when one country can produce more of a good than another country.

Accepted Answer

A)   Comparative
B)   Absolute
C)   Unfair
D)   Home country

Question 13

(Figure: PPF of Econia (a small nation) )  Looking at the production possibilities frontier (PPF)  of Econia, which attainable point would be productively efficient but might be allocatively inefficient?

Accepted Answer

A)   production at point A
B)   production at point E
C)   production at point C
D)   production at point D

Question 14

(Table)  If Germany decided to produce skirts, what is Germany's opportunity cost?   Sweaters  Skirts  Germany 612 Greece 420\begin{array} { r c c } & 	ext { Sweaters } & 	ext { Skirts } \	ext { Germany } & 6 & 12 \	ext { Greece } & 4 & 20\end{array} Germany  Greece ​ Sweaters 64​ Skirts 1220​

Accepted Answer

A)   2 sweaters
B)   0.5 of a sweater
C)   1 sweater
D)   0.25 of a sweater

Question 15

(Figure: Production Possibilities)  Which statement is NOT correct regarding point X?

Accepted Answer

A)   The combination produced at point X is productively efficient.
B)   Society might prefer other combinations on the line to the mix of output a point X.
C)   Because it is on the line, combination at point X has no opportunity cost.
D)   The combination of output at point X might not be allocatively efficient.

Question 16

(Figure: Pork and Corn PPF)  Using the graph, if we are operating at the economy's potential output, then production can be at points:

Accepted Answer

A)   b or h.
B)   c or f.
C)   h or g.
D)   g or d.

Question 17

If the United States has absolute advantages in producing wheat and automobiles, it should never trade with other countries that produce wheat and automobiles.

Accepted Answer

A) True 
 B)False

Question 18

Which situation would MOST likely lead to an import of copper into a certain country?

Accepted Answer

A)   a tariff placed on copper
B)   an absolute disadvantage in the production of copper compared to other nations
C)   an absolute advantage in the production of copper by other nations
D)   a comparative advantage in the production of copper by other nations

Question 19

An increase in the unemployment rate will shift the production possibilities frontier to the right.

Accepted Answer

A) True 
 B)False

Question 20

A production possibilities frontier with constant opportunity costs is:

Accepted Answer

A)   convex.
B)   concave.
C)   a straight line.
D)   horizontal.

Exam 2: Production, Economic Growth, and Trade

(Figure: Production Possibilities) Which statement is NOT correct regarding point X?

Correct AnswerverifiedShow Answer

If the United States has absolute advantages in producing wheat and automobiles, it should never trade with other countries that produce wheat and automobiles.

Correct AnswerverifiedShow Answer

Entrepreneurs combine land, labor, and capital to produce goods and services.

Correct AnswerverifiedShow Answer

Increased illegal immigration into the United States would best be represented with a production possibilities frontier (PPF) as a:

Correct AnswerverifiedShow Answer

Most trade is based on specialization, according to:

Correct AnswerverifiedShow Answer

Comparative advantage exists when one country can produce:

Correct AnswerverifiedShow Answer

Opportunity cost applies only to personal purchasing decisions.

Correct AnswerverifiedShow Answer

(Figure: PPF of Econia (a small nation) ) Looking at the production possibilities frontier (PPF) of Econia, which attainable point would be productively efficient but might be allocatively inefficient?

Correct AnswerverifiedShow Answer

What is one of the risks involved in complete specialization?

Correct AnswerverifiedShow Answer

Which situation would MOST likely lead to an import of copper into a certain country?

Correct AnswerverifiedShow Answer

(Figure: PPF of Econia (a small nation) ) Looking at the production possibilities frontier (PPF) of Econia, which point would have the greatest level of production inefficiency?

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Which of these items restricts our choices so that we must make tradeoffs?

Correct AnswerverifiedShow Answer

_____ advantage exists when one country can produce more of a good than another country.

Correct AnswerverifiedShow Answer

In economics, capital refers to:

Correct AnswerverifiedShow Answer

A production possibilities frontier with constant opportunity costs is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the unemployment rate will shift the production possibilities frontier to the right.

Correct AnswerverifiedShow Answer

When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible:

Correct AnswerverifiedShow Answer

(Figure: Pork and Corn PPF) Using the graph, if we are operating at the economy's potential output, then production can be at points:

Correct AnswerverifiedShow Answer

The main reason why a production possibilities frontier would have a concave shape is:

Correct AnswerverifiedShow Answer

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