Question 1

Explain why specialization and trade increases a country's overall level of consumption.

Accepted Answer

A country specializes in the activities ...

Question 2

As an economy produces more of one of the goods on a bowed out production possibilities frontier,what happens to the opportunity cost of producing the good?

Accepted Answer

A)   It remains constant.
B)   It decreases.
C)   It increases.
D)   It might increase, decrease, or remain constant depending on how much people value the additional units of the good.
E)   None of these depict what happens to opportunity cost.F) A) and D)
G) A) and E) C

Question 3

-Suppose India and France have the same PPF,shown in the figure above.Based on their current production points,which is India's most likely future PPF?

Accepted Answer

A)   PPF₂.
B)   PPF₁.
C)   PPF₀.
D)   Either PPF₀ or PPF₁.
E)   None of the above because economic growth will not happen in India.F) A) and B)
G) B) and C)

Question 4

"Because the United States is the largest economy in the world and can produce anything it needs domestically,there are no gains from trade for the United States." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The...

Question 5

-The table above shows a production possibilities frontier for an economy.Which of the following combinations is unattainable?

Accepted Answer

A)   0 loaves of bread and 800 books
B)   100 loaves of bread and 800 books
C)   200 loaves of bread and 800 books
D)   300 loaves of bread and 200 books
E)   0 loaves of bread and 0 booksF) A) and E)
G) B) and E) C

Question 6

-In the table above,Jill's opportunity cost for 1 pound of food is ________ and her opportunity cost for 1 pound of clothing is ________.

Accepted Answer

A)   1 pound of clothing; 4 pounds of food
B)   1/2 of a pound of clothing; 2 pounds of food
C)   1/3 of a pound of clothing; 3 pounds of food
D)   2 pounds of clothing; 2 pounds of food
E)   1 pound of food; 1 pound of clothingF) C) and D)
G) A) and E) C

Question 7

Why is the production possibilities frontier bowed out?

Accepted Answer

The production possibilities frontier is...

Question 8

John can make pizza at a lower opportunity cost than Allen,but Allen can make more pizzas per day than John.Therefore,

Accepted Answer

A)   John cannot benefit from trade with Allen.
B)   Allen cannot benefit from trade with John.
C)   John has a comparative advantage in pizza.
D)   John has an absolute advantage in pizza.
E)   Allen has a comparative advantage in pizza.F) A) and B)
G) A) and C)

Question 9

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As a country moves along the frontier closer to the vertical axis,

Accepted Answer

A)   the opportunity cost of producing jeans increases.
B)   the opportunity cost of producing shoes increases.
C)   there are fewer tradeoffs.
D)   inefficient production occurs.
E)   the opportunity cost of producing jeans decreases.F) A) and E)
G) C) and E)

Question 10

The opportunity cost of economic growth is

Accepted Answer

A)   0, because it means an expansion of production possibilities.
B)   the decrease in the current production of productive factors.
C)   a slower accumulation of human capital.
D)   the decrease in the current production of consumption goods.
E)   the increase in the nation's capital stock and/or its technology.F) All of the above
G) B) and C)

Question 11

Why is a production possibilities frontier bowed out (concave) ?

Accepted Answer

A)   The bowed shape reflects constant opportunity cost.
B)   The bowed shape reflects decreasing opportunity cost.
C)   The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate.
D)   The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate.
E)   The bowed shape reflects increasing opportunity cost.F) B) and D)
G) C) and D)

Question 12

The production possibilities frontier is the boundary between the

Accepted Answer

A)   goods and services that the economy can produce.
B)   attainable and unattainable combinations of goods and services.
C)   wanted and unwanted combinations of goods and services.
D)   rational and irrational choices facing a society.
E)   affordable and unaffordable combinations of production.F) B) and C)
G) A) and B)

Question 13

The production possibilities frontier is the

Accepted Answer

A)   maximum output that can be produced at an opportunity cost of zero.
B)   minimum output that can be produced when resources are used inefficiently.
C)   boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
D)   boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
E)   maximum opportunity cost combinations of goods and services.F) B) and D)
G) All of the above

Question 14

By specializing and trading,a country is able to

Accepted Answer

A)   obtain the absolute advantage in the goods it produces.
B)   consume but not to produce combinations of goods that lie beyond its production possibilities frontier.
C)   produce but not to consume combinations of goods that lie beyond its production possibilities frontier.
D)   both produce and consume combinations of goods that lie beyond its production possibilities frontier.
E)   neither produce nor consume combinations of goods that lie beyond its production possibilities frontier.F) All of the above
G) A) and C)

Question 15

-The figure above shows the production possibilities frontier for a country.A combination of 4 million gallons of milk and 4 million gallons of ice cream is

Accepted Answer

A)   unattainable.
B)   attainable and production efficient.
C)   attainable and production inefficient.
D)   unattainable and production efficient.
E)   More information is needed to determine if the point is attainable or not.F) A) and B)
G) A) and C)

Question 16

Which of the following statements is correct?
i.As the economy grows,the opportunity costs of economic growth decrease.
ii.Economic growth has no opportunity cost.
iii.The opportunity cost of economic growth is current consumption forgone.

Accepted Answer

A)   i only
B)   ii only
C)   iii only
D)   i and iii
E)   i and iiF) D) and E)
G) C) and E)

Question 17

-The table above presents the production possibilities frontier for a nation.Using the information in the table,when moving from possibility C to D,the cost of 1 unit of a capital good in terms of the consumption goods forgone is ________ consumption goods per capital good.

Accepted Answer

A)   25
B)   15
C)   20
D)   10
E)   an undefined amount ofF) D) and E)
G) B) and E)

Question 18

A reason the production possibilities frontier exists is

Accepted Answer

A)   unlimited resources and technology.
B)   scarcity of resources.
C)   scarcity of resources and unlimited technology.
D)   unemployment.
E)   that people's wants are unlimited.F) B) and D)
G) D) and E)

Question 19

What is the opportunity cost of economic growth?

Accepted Answer

A)   Current period consumption goods
B)   Current period capital goods
C)   Land
D)   Both current period consumption and capital goods
E)   Both current period capital goods and landF) C) and E)
G) B) and D)

Question 20

-The figure above shows a production possibilities frontier.In the figure,the economy faces a tradeoff when ________ cell phones and ________ DVDs.are produced.

Accepted Answer

A)   3 million; 9 million
B)   2 million; 9 million
C)   3 million; 8 million
D)   4.5 million; no
E)   5 million; 15 millionF) A) and D)
G) D) and E)

Exam 3: The Economic Problem

Explain why specialization and trade increases a country's overall level of consumption.

Correct AnswerverifiedA country specializes in the activities ...View AnswerShow Answer

As an economy produces more of one of the goods on a bowed out production possibilities frontier,what happens to the opportunity cost of producing the good?

Correct AnswerverifiedC

-Suppose India and France have the same PPF,shown in the figure above.Based on their current production points,which is India's most likely future PPF?

Correct AnswerverifiedShow Answer

"Because the United States is the largest economy in the world and can produce anything it needs domestically,there are no gains from trade for the United States." Is the previous statement correct or incorrect?

Correct AnswerverifiedThe statement is incorrect.The...View AnswerShow Answer

-The table above shows a production possibilities frontier for an economy.Which of the following combinations is unattainable?

Correct AnswerverifiedC

-In the table above,Jill's opportunity cost for 1 pound of food is ________ and her opportunity cost for 1 pound of clothing is ________.

Correct AnswerverifiedC

Why is the production possibilities frontier bowed out?

Correct AnswerverifiedThe production possibilities frontier is...View AnswerShow Answer

John can make pizza at a lower opportunity cost than Allen,but Allen can make more pizzas per day than John.Therefore,

Correct AnswerverifiedShow Answer

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As a country moves along the frontier closer to the vertical axis,

Correct AnswerverifiedShow Answer

The opportunity cost of economic growth is

Correct AnswerverifiedShow Answer

Why is a production possibilities frontier bowed out (concave) ?

Correct AnswerverifiedShow Answer

The production possibilities frontier is the boundary between the

Correct AnswerverifiedShow Answer

The production possibilities frontier is the

Correct AnswerverifiedShow Answer

By specializing and trading,a country is able to

Correct AnswerverifiedShow Answer

-The figure above shows the production possibilities frontier for a country.A combination of 4 million gallons of milk and 4 million gallons of ice cream is

Correct AnswerverifiedShow Answer

Which of the following statements is correct? i.As the economy grows,the opportunity costs of economic growth decrease. ii.Economic growth has no opportunity cost. iii.The opportunity cost of economic growth is current consumption forgone.

Correct AnswerverifiedShow Answer

-The table above presents the production possibilities frontier for a nation.Using the information in the table,when moving from possibility C to D,the cost of 1 unit of a capital good in terms of the consumption goods forgone is ________ consumption goods per capital good.

Correct AnswerverifiedShow Answer

A reason the production possibilities frontier exists is

Correct AnswerverifiedShow Answer

What is the opportunity cost of economic growth?

Correct AnswerverifiedShow Answer

-The figure above shows a production possibilities frontier.In the figure,the economy faces a tradeoff when ________ cell phones and ________ DVDs.are produced.

Correct AnswerverifiedShow Answer

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A country specializes in the activities ...
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C

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The statement is incorrect.The...
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C

-In the table above,Jill's opportunity cost for 1 pound of food is and her opportunity cost for 1 pound of clothing is .

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C

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The production possibilities frontier is...
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-The figure above shows a production possibilities frontier.In the figure,the economy faces a tradeoff when cell phones and DVDs.are produced.

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