Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 2
1 The Economic Problem: Scarcity and Choice
2.1
2 Scar city, Cho ice, and Op port unit y Cos t
3 1
4 M h ul o ti i pl c e e C
1)
5 The process by which resources are transformed into useful forms is A)
6 capitalization. B)
7 consumption. C)
8 production. D)
9 allocation. Answer:
10 C Diff: 2 Topic:
11 Scarcity, Choice, and Opportunity Cost Skill:
12 Definition
2)
13 Outputs in the production process are A)
14 pollution. B)
15 money. C)
16 good and services of value to households. D)
17 resources. Answer:
18 C Diff: 2 Topic:
19 Scarcity, Choice, and Opportunity Cost Skill:
20 Definition
3)
21 Which of the following is NOT a resource as the term is used by economists? A)
22 land B)
23 labor C)
24 buildings D)
25 money Answer:
26 D Diff: 1 Topic:
27 Scarcity, Choice, and Opportunity Cost Skill:
28 Fact
4)
29 Which of the following would an economist classify as capital? A)
30 a $50 bill B)
31 a corporate bond C)
32 a post office employee D)
33 a guitar used by a musician Answer:
34 D Diff: 2 Topic:
35 Scarcity, Choice, and Opportunity Cost Skill:
36 Conceptual AACSB:
37 Reflective Thinking
38 5)
39 Capital, as economists use the term, A)
40 is the money the firm spends to hire resources. B)
41 is money the firm raises from selling stock. C)
42 refers to the process by which resources are transformed into useful forms. D)
43 refers to have already been produced that are in turn used to produce other goods and services. things that Answer:
44 D Diff: 3 Topic:
45 Scarcity, Choice, and Opportunity Cost Skill:
46 Conceptual AACSB:
47 Reflective Thinking
6)
48 The concept of opportunity cost is based on the principle of A)
49 need. B)
50 consumption. C)
51 scarcity. D)
52 profit. Answer:
53 C Diff: 2 Topic:
54 Scarcity, Choice, and Opportunity Cost Skill:
55 Conceptual
7)
56 The concept of trade-offs would become irrelevant if A)
57 we were dealing with a very simple, one-person economy. B)
58 poverty was eliminated. C)
59 scarcity was eliminated. D)
60 capital was eliminated. Answer:
61 C Diff: 2 Topic:
62 Scarcity, Choice, and Opportunity Cost Skill:
63 Conceptual AACSB:
64 Reflective Thinking
8)
65 Suppose deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. you are You are dealing with the concept of A)
66 diminishing marginal returns. B)
67 comparative advantage. C)
68 opportunity costs. D)
69 the fallacy of composition. Answer:
70 C Diff: 2 Topic:
71 Scarcity, Choice, and Opportunity Cost Skill:
72 Conceptual AACSB:
73 Reflective Thinking
74 9)
75 Accordin g to the theory of comparative advantage, specialization and free trade will benefit A)
76 only that that has both an absolute advantage and a comparative advantage in the production of all trading party goods. B)
77 all trading parties, even when some are absolutely more efficient producers than others. C)
78 only that trading party that has an absolute advantage in the production of all goods. D)
79 only that trading party that has a comparative advantage in the production of all goods. Answer:
80 B Diff: 3 Topic:
81 Scarcity, Choice, and Opportunity Cost Skill:
82 Conceptual AACSB:
83 Reflective Thinking
Refer to the information provided in Table 2.1 below to answer the following questions.
Table 2.1 Krystal Mark Writing Poems 8 12 Writing TV Commercials 2 4 10)
84 Refer to Table 2.1. For Krystal, the opportunity cost of writing one TV commercial is A)
85 1/4 of a poem. B)
86 2 poems. C)
87 4 poems. D)
88 6 poems. Answer:
89 C Diff: 2 Topic:
90 Scarcity, Choice, and Opportunity Cost Skill:
91 Analytic AACSB:
92 Analytic Skills
11)
93 Refer to Table 2.1. For Mark, the opportunity cost of writing one TV commercial is A)
94 1/3 of a poem. B)
95 2 poems. C)
96 3 poems. D)
97 8 poems. Answer:
98 C Diff: 2 Topic:
99 Scarcity, Choice, and Opportunity Cost Skill:
100 Analytic AACSB:
101 Analytic Skills
102 12)
103 Refer to Table 2.1. Which of the following statements is TRUE? A)
104 Krystal has a comparative advantage in both writing TV commercials and writing poems. B)
105 Mark has a comparative advantage in both writing TV commercials and writing poems. C)
106 Krystal has a advantage in writing TV commercials and Mark has a comparative advantage in writing comparative poems. D)
107 Mark has a advantage in writing TV commercials and Krystal has a comparative advantage in writing comparative poems. Answer:
108 D Diff: 2 Topic:
109 Scarcity, Choice, and Opportunity Cost Skill:
110 Analytic AACSB:
111 Analytic Skills
13)
112 Refer to Table 2.1. To maximize total production, A)
113 Krystal should specialize in writing TV commercials and Mark should specialize in writing poems. B)
114 Mark should specialize in writing TV commercials and Krystal should specialize in writing poems. C)
115 Krystal and Mark should both split their time between writing poems and writing TV commercials. D)
116 Krystal should write poems and write TV commercials, but Mark should only write poems. Answer:
117 B Diff: 2 Topic:
118 Scarcity, Choice, and Opportunity Cost Skill:
119 Analytic AACSB:
120 Analytic Skills
14)
121 Refer to For Mark, the opportunity cost of writing six TV commercials is ______poems made. Table 2.1. A)
122 2 B)
123 18 C)
124 24 D)
125 an indeterminate number of Answer:
126 B Diff: 2 Topic:
127 Scarcity, Choice, and Opportunity Cost Skill:
128 Analytic AACSB:
129 Analytic Skills
15)
130 Refer to Table 2.1. For Krystal, the opportunity cost of writing four TV commercials is ______poems. A)
131 2 B)
132 8 C)
133 16 D)
134 32 Answer:
135 C Diff: 2 Topic:
136 Scarcity, Choice, and Opportunity Cost Skill:
137 Analytic AACSB:
138 Analytic Skills
16)
139 Accordin theory of comparative advantage, ______raise(s) productivity by lowering opportunity costs. g to the A)
140 trade and specialization B)
141 investment in capital goods C)
142 economic growth D)
143 exchange and consumption Answer:
144 A Diff: 2 Topic:
145 Scarcity, Choice, and Opportunity Cost Skill:
146 Conceptual AACSB:
147 Reflective Thinking
17)
148 When two people trade A)
149 both of them expect to be made worse off by the exchange. B)
150 they are trying to help out each other. C)
151 they know one of them will get the better of the other. D)
152 they both expect to be made better off by the exchange. Answer:
153 D Diff: 2 Topic:
154 Scarcity, Choice, and Opportunity Cost Skill:
155 Conceptual AACSB:
156 Reflective Thinking
18)
157 Someone has a comparative advantage in producing a good if they can produce that good A)
158 in greater quantities. B)
159 at a lower opportunity cost. C)
160 using more capital and less labor. D)
161 without sunk costs. Answer:
162 B Diff: 2 Topic:
163 Scarcity, Choice, and Opportunity Cost Skill:
164 Conceptual AACSB:
165 Reflective Thinking
19)
166 If someone has a comparative advantage in growing pineapples, A)
167 they can grow pineapples at a lower opportunity cost than other pineapple growers. B)
168 they also have an absolute advantage in growing pineapples. C)
169 they can grow more pineapples using the same resources than other pineapple growers. D)
170 pineapples are the only product they can grow. Answer:
171 A Diff: 2 Topic:
172 Scarcity, Choice, and Opportunity Cost Skill:
173 Conceptual AACSB:
174 Reflective Thinking
175 20)
176 Which of the following does NOT constitute an act of "investment" as economists use the term? A)
177 The city council authorizes the construction of a new fire station. B)
178 A retiree buys 50 shares of stock at $10 a share and then sells the stock at a profit for $20 a share. C)
179 An accountant attends a seminar on changes in the federal tax code. D)
180 A department store increases its inventory of football jerseys before the Super Bowl. Answer:
181 B Diff: 2 Topic:
182 Scarcity, Choice, and Opportunity Cost Skill:
183 Conceptual AACSB:
184 Reflective Thinking
21)
185 In economics, investment always refers to A)
186 the act of buying stocks or bonds. B)
187 the creation of capital. C)
188 increasing the quantity of labor. D)
189 an increase in per capita output. Answer:
190 B Diff: 2 Topic:
191 Scarcity, Choice, and Opportunity Cost Skill:
192 Definition
22)
193 The process of using resources to produce new capital is A)
194 research and development. B)
195 investment. C)
196 consumption. D)
197 economic growth. Answer:
198 B Diff: 2 Topic:
199 Scarcity, Choice, and Opportunity Cost Skill:
200 Definition
23)
201 An example of forgoing present benefits in order to receive future benefits is A)
202 production. B)
203 saving. C)
204 consumption. D)
205 growth. Answer:
206 B Diff: 2 Topic:
207 Scarcity, Choice, and Opportunity Cost Skill:
208 Definition
24)
209 Because resources are scarce, the opportunity cost of investment in capital is A)
210 zero. B)
211 forgone future consumption. C)
212 forgone present consumption. D)
213 infinite. Answer:
214 C Diff: 2 Topic:
215 Scarcity, Choice, and Opportunity Cost Skill:
216 Conceptual AACSB:
217 Reflective Thinking
25)
218 An example of an investment is A)
219 the purchase of a share of Google stock. B)
220 the purchase of an Exxon Mobil bond. C)
221 the purchase of a Hewlett Packard laser printer for use by a business. D)
222 all of the above. Answer:
223 C Diff: 2 Topic:
224 Scarcity, Choice, and Opportunity Cost Skill:
225 Conceptual AACSB:
226 Reflective Thinking
26)
227 The opportunity cost of investment in capital is forgone present consumption because A)
228 capital takes a long time to produce. B)
229 capital increases the productivity of labor. C)
230 resources are scarce. D)
231 capital is an intangible good. Answer:
232 C Diff: 3 Topic:
233 Scarcity, Choice, and Opportunity Cost Skill:
234 Conceptual AACSB:
235 Reflective Thinking
27)
236 If the unemployment rate increases from 10% to 14%, the economy will A)
237 move closer to a point on the ppf. B)
238 move away from the ppf toward the origin. C)
239 remain on the ppf. D)
240 remain on the origin. Answer:
241 B Diff: 2 Topic:
242 Scarcity, Choice, and Opportunity Cost Skill:
243 Conceptual AACSB:
244 Reflective Thinking
28)
245 Periods of less than full employment correspond to A)
246 points outside the ppf. B)
247 points underneath the ppf. C)
248 points on the ppf. D)
249 either points inside or outside the ppf. Answer:
250 B Diff: 2 Topic:
251 Scarcity, Choice, and Opportunity Cost Skill:
252 Conceptual AACSB:
253 Reflective Thinking
254 Refer to the information provided in Figure 2.1 below to answer the questions that follow.
Figure 2.1
29)
255 Refer to Figure 2.1. Macroland is currently operating at Point A. The best explanation for this is that A)
256 the economy has very poor technology. B)
257 the economy's resources are being used inefficiently. C)
258 the economy has very few resources. D)
259 the economy operates as an efficient market. Answer:
260 B Diff: 2 Topic:
261 Scarcity, Choice, and Opportunity Cost Skill:
262 Conceptual AACSB:
263 Reflective Thinking
30)
264 Refer to Figure 21. Macroland's production possibility frontier is bowed out from the origin due to A)
265 decreasing opportunity costs. B)
266 trade. C)
267 unemploymen t. D)
268 specialized resources. Answer:
269 D Diff: 2 Topic:
270 Scarcity, Choice, and Opportunity Cost Skill:
271 Conceptual AACSB:
272 Reflective Thinking
31)
273 Refer to Figure 2.1. The shape of Macroland's production possibility frontier shows A)
274 increasing opportunity costs. B)
275 constant opportunity costs. C)
276 decreasing opportunity costs. D)
277 random opportunity costs. Answer:
278 A Diff: 2 Topic:
279 Scarcity, Choice, and Opportunity Cost Skill:
280 Conceptual AACSB:
281 Reflective Thinking
282 32)
283 The production possibility frontier is used to illustrate the concept of A)
284 the laissez- faire economy. B)
285 opportunity costs. C)
286 equilibrium. D)
287 aggregate demand. Answer:
288 B Diff: 1 Topic:
289 Scarcity, Choice, and Opportunity Cost Skill:
290 Fact
Refer to the information provided in Figure 2.2 below to answer the questions that follow.
Figure 2.2
33)
291 Refer to Figure 2.2. Point B represents a situation of A)
292 full employment but production inefficiency. B)
293 less than full employment but production efficiency. C)
294 both full resource employment and production efficiency. D)
295 less than full employment and production inefficiency. Answer:
296 C Diff: 1 Topic:
297 Scarcity, Choice, and Opportunity Cost Skill:
298 Conceptual AACSB:
299 Reflective Thinking
34)
300 Refer to Figure 2.2. Microland is currently operating at Point B. You correctly deduce that A)
301 in Microland all resources are fully employed and there are no production inefficiencies. B)
302 Microland has achieved a position of inefficiency. C)
303 Microland has recently experienced some type of technological breakthrough. D)
304 Microland has overcome the problem of scarcity. Answer:
305 A Diff: 2 Topic:
306 Scarcity, Choice, and Opportunity Cost Skill:
307 Analytic AACSB:
308 Analytic Skills
309 35)
310 The production possibility frontier is a graph that shows A)
311 all the of goods and services that are consumed over time if all of society's resources are used combinations efficiently. B)
312 the amount of goods and services consumed at various average price levels. C)
313 the rate at which an economy's output will grow over time if all resources are used efficiently. D)
314 all the of goods and services that can be produced if all of society's resources are used efficiently. combinations Answer:
315 D Diff: 2 Topic:
316 Scarcity, Choice, and Opportunity Cost Skill:
317 Definition
36)
318 Producti on inefficiency occurs A)
319 only when an economy produces underneath its production possibility frontier. B)
320 only when an economy produces at the wrong point on the production possibility frontier. C)
321 either when produces underneath the production possibility frontier or when the economy is an economy producing the wrong combination of goods on the production possibility frontier. D)
322 only when the economy produces outside the production possibility frontier. Answer:
323 A Diff: 3 Topic:
324 Scarcity, Choice, and Opportunity Cost Skill:
325 Conceptual AACSB:
326 Reflective Thinking
37)
327 An that is producing on the production possibility frontier at some point other than the output of economy efficient allocation is A)
328 efficient, as it is on the production possibility frontier. B)
329 inefficient, as the combination of goods and services produced is not what people want. C)
330 efficient, as the economy is producing goods at the lowest possible cost. D)
331 inefficient, as combination of goods could be produced at a lower cost if more efficient technology were that employed. Answer:
332 B Diff: 2 Topic:
333 Scarcity, Choice, and Opportunity Cost Skill:
334 Conceptual AACSB:
335 Reflective Thinking
38)
336 If resources are combined efficiently in production, then the society A)
337 is producing at the most-desirable point on the production possibility frontier. B)
338 is producing the production possibility frontier but not necessarily at the most-desirable point. at a point on C)
339 is producing at a point outside the production possibility frontier. D)
340 is experiencing economic growth. Answer:
341 B Diff: 1 Topic:
342 Scarcity, Choice, and Opportunity Cost Skill:
343 Conceptual AACSB:
344 Reflective Thinking
345 39)
346 Suppose produces hybrid engines and solar panels in perfectly competitive industries. The economy is an currently operating at a point on its ppf. If a single firm gains control over the production of economy solar panels, which of the following is most likely to happen? A)
347 The economy will move to a less-desirable point on the ppf. B)
348 The economy's ppf will shift inward. C)
349 The economy will now be able to produce at a point outside its ppf. D)
350 The economy's ppf will shift outward, but the maximum number of solar panels will remain the same. Answer:
351 A Diff: 2 Topic:
352 Scarcity, Choice, and Opportunity Cost Skill:
353 Analytic AACSB:
354 Analytic Skills
40)
355 The value of the slope of a society's production possibility frontier is called its A)
356 marginal rate of substitution. B)
357 inflation rate. C)
358 unemploymen t rate. D)
359 marginal rate of transformation. Answer:
360 D Diff: 2 Topic:
361 Scarcity, Choice, and Opportunity Cost Skill:
362 Definition
41)
363 The marginal rate of transformation is the A)
364 slope of the production possibility frontier. B)
365 dollar value of the best forgone alternative. C)
366 process of using resources to produce new capital. D)
367 transformatio n of resources into a form that is useful to people. Answer:
368 A Diff: 2 Topic:
369 Scarcity, Choice, and Opportunity Cost Skill:
370 Definition
371 Refer to the information provided in Figure 2.3 below to answer the questions that follow.
Figure 2.3
42)
372 Refer to Assume that in this society the marginal rate of transformation of sailboats for surfboards is Figure constant and equal to -10. A graph of this society's production possibility frontier will be 2.3. represented by A)
373 A. B)
374 B. C)
375 C. D)
376 D. Answer:
377 C Diff: 2 Topic:
378 Scarcity, Choice, and Opportunity Cost Skill:
379 Conceptual AACSB:
380 Reflective Thinking
43)
381 Refer to 2.3. Assume that in this society the opportunity cost of sailboats in terms of surfboards is Figure increasing. A graph of this society's production possibility frontier will be represented by A)
382 A. B)
383 B. C)
384 C. D)
385 D. Answer:
386 A Diff: 2 Topic:
387 Scarcity, Choice, and Opportunity Cost Skill:
388 Conceptual AACSB:
389 Reflective Thinking
390 44)
391 Refer to 2.3. The law of ______opportunity costs is best depicted by the production possibilities Figure frontier in panel A. A)
392 increasing B)
393 constant C)
394 decreasing D)
395 zero Answer:
396 A Diff: 2 Topic:
397 Scarcity, Choice, and Opportunity Cost Skill:
398 Conceptual AACSB:
399 Reflective Thinking
45)
400 A society two goods: donuts and beer. The society's production possibility frontier is negatively sloped can and "bowed outward" from the origin. As this society moves down its production possibility produce frontier, producing more and more units of donuts, the opportunity cost of producing beer A)
401 decreases. B)
402 remains constant. C)
403 increases. D)
404 could decrease or increase depending on the technology. Answer:
405 C Diff: 2 Topic:
406 Scarcity, Choice, and Opportunity Cost Skill:
407 Conceptual AACSB:
408 Reflective Thinking
Refer to the information provided in Figure 2.4 below to answer the questions that follow.
Figure 2.4
46)
409 Accordin g to Figure 2.4, the point where only motorcycles are produced is A)
410 A. B)
411 B. C)
412 C. D)
413 E. Answer:
414 D Diff: 2 Topic:
415 Scarcity, Choice, and Opportunity Cost Skill:
416 Analytic AACSB:
417 Analytic Skills
418 47)
419 Accordin g to Figure 2.4, the optimal point for the economy is A)
420 A. B)
421 B. C)
422 F. D)
423 indeterminate from the information given. Answer:
424 D Diff: 2 Topic:
425 Scarcity, Choice, and Opportunity Cost Skill:
426 Analytic AACSB:
427 Analytic Skills
48)
428 Accordin g to Figure 2.4, which point cannot be produced with the current state of technology? A)
429 A B)
430 B C)
431 C D)
432 F Answer:
433 D Diff: 2 Topic:
434 Scarcity, Choice, and Opportunity Cost Skill:
435 Analytic AACSB:
436 Analytic Skills
49)
437 Accordin g to Figure 2.4, the point where only hybrid cars are produced is A)
438 A. B)
439 B. C)
440 C. D)
441 D. Answer:
442 A Diff: 2 Topic:
443 Scarcity, Choice, and Opportunity Cost Skill:
444 Analytic AACSB:
445 Analytic Skills
50)
446 Accordin g to Figure 2.4, a decrease in unemployment may be represented by the movement from A)
447 B to A. B)
448 B to D. C)
449 C to D. D)
450 A to C. Answer:
451 C Diff: 2 Topic:
452 Scarcity, Choice, and Opportunity Cost Skill:
453 Analytic AACSB:
454 Analytic Skills
455 51)
456 Accordin Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, g to measured in terms of hybrid cars, A)
457 decreases. B)
458 increases. C)
459 remains constant. D)
460 initially increases, then decreases. Answer:
461 B Diff: 2 Topic:
462 Scarcity, Choice, and Opportunity Cost Skill:
463 Analytic AACSB:
464 Analytic Skills
52)
465 Accordin Figure 2.4, as the economy moves from Point E to Point A, the opportunity cost of hybrid cars, g to measured in terms of motorcycles, A)
466 increases. B)
467 decreases. C)
468 remains constant. D)
469 initially increases, then decreases. Answer:
470 A Diff: 2 Topic:
471 Scarcity, Choice, and Opportunity Cost Skill:
472 Analytic AACSB:
473 Analytic Skills
53)
474 Refer to Figure 2.4. The economy moves from Point A to Point D. This could be explained by A)
475 a reduction in unemployment. B)
476 an improvement in technology. C)
477 an increase in economic growth. D)
478 a change in society's preferences for motorcycles versus hybrid cars. Answer:
479 D Diff: 2 Topic:
480 Scarcity, Choice, and Opportunity Cost Skill:
481 Analytic AACSB:
482 Analytic Skills
483 Refer to the information provided in Figure 2.5 below to answer the questions that follow.
Figure 2.5
54)
484 Refer to 2.5. The economy is currently at Point A. The opportunity cost of moving from Point A to Point Figure B is the A)
485 90 LCD televisions that must be forgone to produce 20 additional plasma televisions. B)
486 30 LCD televisions that must be forgone to produce 60 additional plasma televisions. C)
487 120 LCD televisions that must be forgone to produce 40 additional plasma televisions. D)
488 30 LCD televisions that must be forgone to produce 20 additional plasma televisions. Answer:
489 D Diff: 2 Topic:
490 Scarcity, Choice, and Opportunity Cost Skill:
491 Analytic AACSB:
492 Analytic Skills
55)
493 Refer to Figure 2.5. The marginal rate of transformation in moving from Point A to Point B is A)
494 -2/3. B)
495 -1.5. C)
496 -3. D)
497 -30. Answer:
498 B Diff: 2 Topic:
499 Scarcity, Choice, and Opportunity Cost Skill:
500 Analytic AACSB:
501 Analytic Skills
56)
502 Refer to 2.5. For this economy to move from Point B to Point C so that an additional 20 plasma Figure televisions could be produced, production of LCD televisions would have to be reduced by A)
503 exactly 30. B)
504 fewer than 30. C)
505 more than 30. D)
506 exactly 60. Answer:
507 C Diff: 3 Topic:
508 Scarcity, Choice, and Opportunity Cost Skill:
509 Analytic AACSB:
510 Analytic Skills
511 57)
512 Refer to Figure 2.5. The best point for society would be A)
513 Point C, as at there are approximately equal amounts of LCD and plasma televisions being produced. this point B)
514 either Point B the total amount being produced at either of these points is approximately the same. or Point C, as C)
515 at any of the labeled points, as all of the points represent an efficient allocation of resources. D)
516 indeterminate from this information, as we don't have any information about the society's desires. Answer:
517 D Diff: 2 Topic:
518 Scarcity, Choice, and Opportunity Cost Skill:
519 Analytic AACSB:
520 Analytic Skills
58)
521 If the ity costs of producing a good increase as more of that good is produced, the economy's opportun production possibility frontier will be A)
522 negatively sloped and "bowed inward" toward the origin. B)
523 negatively sloped and "bowed outward" from the origin. C)
524 a negatively sloped straight line. D)
525 a positively sloped straight line. Answer:
526 B Diff: 3 Topic:
527 Scarcity, Choice, and Opportunity Cost Skill:
528 Conceptual AACSB:
529 Reflective Thinking
59)
530 As you down the production possibility frontier, the absolute value of the marginal rate of move transformation A)
531 increases. B)
532 decreases. C)
533 initially increases, then decreases. D)
534 initially decreases, then increases. Answer:
535 A Diff: 3 Topic:
536 Scarcity, Choice, and Opportunity Cost Skill:
537 Conceptual AACSB:
538 Reflective Thinking
539 60)
540 As more good, such as television sets, is produced, the opportunity costs of producing it increases. This of a most likely occurs because A)
541 as more of a good is produced the inputs used to produce that good will increase in price. B)
542 consumers would be willing to pay higher prices for the good as more of the good is produced. C)
543 resources are well suited to producing all goods and as more of a good is produced it is necessary to not equally use resources less well suited to the production of that good. D)
544 as more of a produced the quality of that good declines and therefore the costs of production increase. good is Answer:
545 C Diff: 3 Topic:
546 Scarcity, Choice, and Opportunity Cost Skill:
547 Conceptual AACSB:
548 Reflective Thinking
61)
549 Economi c growth may occur when A)
550 a society acquires new resources. B)
551 a society learns to produce more using existing resources. C)
552 the society begins to produce the combination of goods society wants most. D)
553 both A and B Answer:
554 D Diff: 2 Topic:
555 Scarcity, Choice, and Opportunity Cost Skill:
556 Conceptual AACSB:
557 Reflective Thinking
Refer to the information provided in Figure 2.6 below to answer the questions that follow.
Figure 2.6
62)
558 Refer to Figure 2.6. Economic growth is represented by a A)
559 shift from ppf2 to ppf1. B)
560 shift from ppf1 to ppf2. C)
561 movement along ppf1. D)
562 movement along ppf2 Answer:
563 B Diff: 2 Topic:
564 Scarcity, Choice, and Opportunity Cost Skill:
565 Analytic AACSB:
566 Analytic Skills
63)
567 Refer to Figure 2.6. An improvement in technology may be represented by a A)
568 shift from ppf2 to ppf1. B)
569 shift from ppf1 to ppf2. C)
570 movement along ppf2. D)
571 movement along ppf1. Answer:
572 B Diff: 2 Topic:
573 Scarcity, Choice, and Opportunity Cost Skill:
574 Analytic AACSB:
575 Analytic Skills
64)
576 Refer to 2.6. Which of the following will shift an economy's production possibility frontier from ppf1 to Figure ppf2? A)
577 a decrease in unemployment B)
578 an increase in production efficiency C)
579 a change in consumer's tastes D)
580 an increase in the economy's capital stock Answer:
581 D Diff: 2 Topic:
582 Scarcity, Choice, and Opportunity Cost Skill:
583 Analytic AACSB:
584 Analytic Skills
65)
585 Refer to 2.6. Which of the following will NOT cause the production possibility frontier to shift from ppf1 Figure to ppf2? A)
586 the discovery of previously unknown oil fields B)
587 an improvement in technology C)
588 an increase in the stock of capital D)
589 a decrease in the unemployment rate Answer:
590 D Diff: 2 Topic:
591 Scarcity, Choice, and Opportunity Cost Skill:
592 Analytic AACSB:
593 Analytic Skills
66)
594 Refer to 2.6. Which of the following is most likely to shift the production possibility frontier from ppf1 to Figure ppf2? A)
595 a change in consumer tastes B)
596 the purchase of stocks on the New York Stock Exchange C)
597 moving resources from capital to consumer goods D)
598 an increase in the general educational level of the population Answer:
599 D Diff: 2 Topic:
600 Scarcity, Choice, and Opportunity Cost Skill:
601 Analytic AACSB:
602 Analytic Skills
603 67)
604 Refer to Figure 2.6. If the economy is at ppf1, a change in consumer preferences would be shown by a A)
605 shift from ppf2 to ppf1. B)
606 movement along ppf1. C)
607 movement along ppf2. D)
608 shift from ppf1 to ppf2. Answer:
609 B Diff: 2 Topic:
610 Scarcity, Choice, and Opportunity Cost Skill:
611 Analytic AACSB:
612 Analytic Skills
68)
613 During the Iraq War many of Iraq's oil refineries were destroyed. This would best be represented by a A)
614 movement down Iraq's production possibility frontier. B)
615 movement off Iraq's production possibility frontier to some point inside the frontier. C)
616 shift of Iraq's production possibility frontier toward the origin. D)
617 movement up Iraq's production possibility frontier. Answer:
618 C Diff: 2 Topic:
619 Scarcity, Choice, and Opportunity Cost Skill:
620 Analytic AACSB:
621 Analytic Skills
69)
622 For an economy to produce at a point beyond its current ppf, the economy must A)
623 waste less. B)
624 be more efficient. C)
625 reduce inputs. D)
626 increase its resource base. Answer:
627 D Diff: 3 Topic:
628 Scarcity, Choice, and Opportunity Cost Skill:
629 Conceptual AACSB:
630 Reflective Thinking
70)
631 In terms production possibility frontier, an increase in productivity attributable to new technology of the would best be shown by A)
632 a movement along the frontier. B)
633 the production possibility frontier shifting outward, away from the origin. C)
634 a movement from a point inside the frontier to a point on it. D)
635 a movement toward the origin. Answer:
636 B Diff: 2 Topic:
637 Scarcity, Choice, and Opportunity Cost Skill:
638 Conceptual AACSB:
639 Reflective Thinking
640 71)
641 An improvement in technology will cause the A)
642 production possibility frontier to shift outward. B)
643 production possibility frontier to shift inward. C)
644 economy to move down the production possibility frontier. D)
645 economy to move closer to its production possibility frontier. Answer:
646 A Diff: 1 Topic:
647 Scarcity, Choice, and Opportunity Cost Skill:
648 Conceptual AACSB:
649 Reflective Thinking
72)
650 Consider countries, Japan and Malaysia. Japan devotes a smaller portion of its production to capital. All two other things equal which of the following statements is most likely true? A)
651 Japan is a poorer country than Malaysia. B)
652 Japan will move up its production possibility curve faster than Malaysia. C)
653 Malaysia is inside its production possibility frontier, whereas Japan is producing at a point on its producing production possibility frontier. D)
654 Malaysia's production possibility frontier will shift up and out farther and faster than Japan's. Answer:
655 D Diff: 3 Topic:
656 Scarcity, Choice, and Opportunity Cost Skill:
657 Conceptual AACSB:
658 Reflective Thinking
73)
659 The gap between rich and poor countries A)
660 has decreased over time because poor countries can more easily devote resources to capital production. B)
661 has increased because poor countries find it difficult to devote resources to capital production. over time C)
662 has remained constant over time because technological advances can be easily shared among nations. D)
663 has remained time because the rate of capital production has remained constant in rich and poor constant over nations. Answer:
664 B Diff: 1 Topic:
665 Scarcity, Choice, and Opportunity Cost Skill:
666 Fact
74)
667 An capital goods and consumer goods. This economy is operating at a point on its production economy possibility frontier associated with a small amount of capital goods and a large amount of produces consumer goods. This is most likely to be a A)
668 "poor" country nation has difficulty devoting many resources to the production of capital goods. because such a B)
669 "rich" country because such a nation can afford to sacrifice. C)
670 country with a free market. D)
671 country with a command economy. Answer:
672 A Diff: 3 Topic:
673 Scarcity, Choice, and Opportunity Cost Skill:
674 Conceptual AACSB:
675 Reflective Thinking
75)
676 The economic problem can best be stated as A)
677 How can the improve technology so as to shift the production possibility frontier up and to the right? economy B)
678 Given scarce how exactly do societies go about deciding what to produce, how to produce it, and for resources, whom to produce? C)
679 Given the fact economy is inefficient, how much and what type of government intervention should be that the used to improve the efficiency of the economy? D)
680 What is the best rate of economic growth for a society? Answer:
681 B Diff: 2 Topic:
682 Scarcity, Choice, and Opportunity Cost Skill:
683 Definition
76)
684 Related Economics in Practice on p. 28: Which one of the following occurs when an individual enters the to the paid work force? A)
685 The cost of time for housework increases, because time spent on housework could be spent on opportunity money-earning activities. B)
686 The cost of time for housework increases, because money earned at a job can allow individuals opportunity to pay someone to do household chores that the individuals used to do themselves. C)
687 The cost of time for housework decreases, because increased earning power makes opportunity individuals less likely to do their own housework. D)
688 The for housework decreases, because as more people enter the work force, businesses have opportunity greater incentives to develop innovations that make housework more efficient. cost of time Answer:
689 A Diff: 3 Topic:
690 Scarcity, Choice, and Opportunity Cost: Economics in Practice Skill:
691 Analytic AACSB:
692 Analytic Skills
77)
693 Related Economics in Practice on p. 28: How did the introduction of the microwave in 1960 affect the to the market for frozen food? A)
694 It encouraged people to leave the work force by making cooking easier and less time-consuming. B)
695 It reduced the cost of eating frozen food by decreasing the amount of time required to prepare frozen opportunity meals. C)
696 It increased the financial cost of alternative methods of food preparation, such as conventional ovens. D)
697 It made frozen appealing by increasing the variety of meals that could be frozen and reheated. foods more Answer:
698 B Diff: 3 Topic:
699 Scarcity, Choice, and Opportunity Cost: Economics in Practice Skill:
700 Analytic AACSB:
701 Analytic Skills
2
702 Tr s ue e /F al
1)
703 In economics, the term capital refers only to some form of money. Answer:
704 FALSE Diff: 2 Topic:
705 Scarcity, Choice, and Opportunity Cost Skill:
706 Definition
2)
707 Among the resources used in production are labor and capital. Answer:
708 TRUE Diff: 2 Topic:
709 Scarcity, Choice, and Opportunity Cost Skill:
710 Definition
3)
711 Things already been produced that are in turn used to produce other goods and services over time are that have called "capital." Answer:
712 TRUE Diff: 2 Topic:
713 Scarcity, Choice, and Opportunity Cost Skill:
714 Definition
4)
715 When two people trade, one must lose. Answer:
716 FALSE Diff: 2 Topic:
717 Scarcity, Choice, and Opportunity Cost Skill:
718 Conceptual AACSB:
719 Reflective Thinking
5)
720 Economi c growth shifts a society's production possibility frontier away from the origin. Answer:
721 TRUE Diff: 1 Topic:
722 Scarcity, Choice, and Opportunity Cost Skill:
723 Conceptual AACSB:
724 Reflective Thinking
6)
725 A production possibility frontier is bowed in from the origin due to specialized resources. society's Answer:
726 FALSE Diff: 1 Topic:
727 Scarcity, Choice, and Opportunity Cost Skill:
728 Fact
7)
729 The c problem" is that given scarce resources, how do large societies go about answering the basic "economi economic questions of what will be produced, how it will be produced, and who will get it. Answer:
730 TRUE Diff: 1 Topic:
731 Scarcity, Choice, and Opportunity Cost Skill:
732 Definition
8)
733 Compara tive advantage refers to the ability to produce better quality goods than a competitor. Answer:
734 FALSE Diff: 2 Topic:
735 Scarcity, Choice, and Opportunity Cost Skill:
736 Definition
9)
737 Compara tive advantage refers to the ability to produce at a lower opportunity cost than a competitor. Answer:
738 TRUE Diff: 2 Topic:
739 Scarcity, Choice, and Opportunity Cost Skill:
740 Definition
10)
741 The government produces only what the market is willing to pay for. Answer:
742 FALSE Diff: 1 Topic:
743 Scarcity, Choice, and Opportunity Cost Skill:
744 Conceptual AACSB:
745 Reflective Thinking
2.2
746 Eco no mic Syst ems
747 1
748 M h ul o ti i pl c e e C
1)
749 An in which a central authority draws up a plan that establishes what will be produced and when, economy sets production goals, and makes rules for distribution is a A)
750 free market economy. B)
751 laissez-faire economy. C)
752 public goods economy. D)
753 command economy. Answer:
754 D Diff: 2 Topic:
755 Economic Systems Skill:
756 Definition
2)
757 An in which individual people and firms pursue their own self-interest without any central economy direction or regulation is a(n) A)
758 command economy. B)
759 laissez-faire economy. C)
760 invisible-hand economy. D)
761 private-sector economy. Answer:
762 B Diff: 2 Topic:
763 Economic Systems Skill:
764 Definition
3)
765 Which of the following statements is FALSE? A)
766 Many planned have not fared very well in recent years; many of these economies have almost completely economies collapsed. B)
767 Command operate the most efficiently because the government makes all the production decisions. economies C)
768 In command economies consumers still exercise choice. D)
769 In a command government answers the questions of what to produce, how to produce it, and how to economy the distribute it. Answer:
770 B Diff: 2 Topic:
771 Economic Systems Skill:
772 Conceptual AACSB:
773 Reflective Thinking
774 4)
775 Which of the following is an element of a command economy? A)
776 The market decides distribution. B)
777 The means of production are privately owned. C)
778 Production decisions are centralized. D)
779 The market decides what will be produced. Answer:
780 C Diff: 1 Topic:
781 Economic Systems Skill:
782 Fact
5)
783 Which of the following statements is NOT true for a command economy? A)
784 Consumers have some choices concerning what they buy. B)
785 The government decides what is produced. C)
786 The amount of a good supplied always equals the amount of the good demanded. D)
787 The state decides how to distribute what is produced. Answer:
788 C Diff: 1 Topic:
789 Economic Systems Skill:
790 Fact
6)
791 In a laissez-faire economy ______what gets produced, how it is produced, and who gets it. A)
792 the behavior of buyers and sellers determines B)
793 the central government authority determines C)
794 firms but not consumers determine D)
795 consumers but not firms determine Answer:
796 A Diff: 1 Topic:
797 Economic Systems Skill:
798 Fact
7)
799 An institution through which buyers and sellers interact and engage in exchange is A)
800 a central authority. B)
801 "laissez-faire." C)
802 a market. D)
803 a production frontier. Answer:
804 C Diff: 2 Topic:
805 Economic Systems Skill:
806 Definition
8)
807 Which of the following is NOT true of a market economy? A)
808 In its pure form, it is also known as a laissez-faire economy. B)
809 Decisions are regulated by a central agency. C)
810 The between buyers and sellers answers the basic economic questions of what gets produced, interaction how it gets produced, and who gets it. D)
811 It relies on millions of individual economic decisions to determine economic outcomes. Answer:
812 B Diff: 2 Topic:
813 Economic Systems Skill:
814 Fact
815 9)
816 Consum er sovereignty A)
817 is dependent on profits. B)
818 is the idea that consumers can buy whatever they want to. C)
819 is the idea that consumers determine what is produced in the economy through their demands. D)
820 is only possible in a monarchy. Answer:
821 C Diff: 2 Topic:
822 Economic Systems Skill:
823 Definition
10)
824 The idea consumers ultimately dictate what will be produced by choosing what to purchase is known as that A)
825 laissez-faire. B)
826 the economic problem. C)
827 centralized decision making. D)
828 consumer sovereignty. Answer:
829 D Diff: 2 Topic:
830 Economic Systems Skill:
831 Definition
11)
832 The that households have accumulated out of past income through saving and inheritance is amount A)
833 future income. B)
834 wealth. C)
835 consumption. D)
836 past income. Answer:
837 B Diff: 2 Topic:
838 Economic Systems Skill:
839 Definition
12)
840 In a free market system, the amount of output that any one household gets depends on its A)
841 income. B)
842 wealth. C)
843 wage and interest income. D)
844 income and wealth. Answer:
845 D Diff: 1 Topic:
846 Economic Systems Skill:
847 Conceptual AACSB:
848 Reflective Thinking
13)
849 Advocat es of an unregulated market system argue that A)
850 competition promotes efficiency. B)
851 competition leads to innovation. C)
852 competition leads to product variety and quality. D)
853 all of the above Answer:
854 D Diff: 3 Topic:
855 Economic Systems Skill:
856 Conceptual AACSB:
857 Reflective Thinking
14)
858 The basic coordinating mechanism in a free market system is A)
859 quantity. B)
860 price. C)
861 a central government authority. D)
862 the corporation. Answer:
863 B Diff: 1 Topic:
864 Economic Systems Skill:
865 Fact
15)
866 Which of the following statements is FALSE? A)
867 In a free system, the basic economic questions are answered without the help of a central market government plan or directive. B)
868 Individuals their own-self interest will produce products and services that other people want. guided by C)
869 The basic mechanism in a free market system is quantity adjustments toward equilibrium. coordinating D)
870 In a free market system, competition forces firms to adopt efficient production techniques. Answer:
871 C Diff: 2 Topic:
872 Economic Systems Skill:
873 Conceptual AACSB:
874 Reflective Thinking
16)
875 Some economists advocate government intervention in a market economy A)
876 to produce collective goods and services. B)
877 when resource costs for a private producer do not reflect the full cost to society. C)
878 to stabilize the economy. D)
879 all of the above Answer:
880 D Diff: 1 Topic:
881 Economic Systems Skill:
882 Fact
2
883 Tr s ue e /F al
1)
884 A faire economy is one in which individual people and firms pursue their own self-interest laissez- without any central direction or regulation. Answer:
885 TRUE Diff: 1 Topic:
886 Economic Systems Skill:
887 Definition
2)
888 A d economy is one in which a central government sets output targets, incomes and prices. comman Answer:
889 TRUE Diff: 1 Topic:
890 Economic Systems Skill:
891 Definition
892 3)
893 A command economy eliminates markets. Answer:
894 FALSE Diff: 2 Topic:
895 Economic Systems Skill:
896 Conceptual AACSB:
897 Reflective Thinking
4)
898 Price is the coordinating mechanism in a planned economy. Answer:
899 FALSE Diff: 1 Topic:
900 Economic Systems Skill:
901 Definition
5)
902 The that buyers determine what will be produced by choosing what they purchase is called notion consumer sovereignty. Answer:
903 TRUE Diff: 1 Topic:
904 Economic Systems Skill:
905 Definition
906