Question 1

The negative slope of the production possibilities frontier represents the idea

Accepted Answer

A)  of tradeoffs, that, in order to produce more of one good, the nation must produce less of another. 
B)  that prices rise as less is produced. 
C)  of unemployment. 
D)  of inefficient production. 
E)  that free lunches are possible. 
A)  of tradeoffs, that, in order to produce more of one good, the nation must produce less of another. 
B)  that prices rise as less is produced. 
C)  of unemployment. 
D)  of inefficient production. 
E)  that free lunches are possible. A

Question 2

Which of the following is the best definition of economic growth?

Accepted Answer

A)  The sustained expansion of production possibilities 
B)  The opportunity cost of consumption 
C)  Increased development of land and entrepreneurship 
D)  The opportunity cost of capital 
E)  The investment in capital and consumption goods by an economy 
A)  The sustained expansion of production possibilities 
B)  The opportunity cost of consumption 
C)  Increased development of land and entrepreneurship 
D)  The opportunity cost of capital 
E)  The investment in capital and consumption goods by an economy A

Question 3

Moving between two points on a PPF, a country gains 6 cars and forgoes 3 trucks. The opportunity cost of 1 car is

Accepted Answer

A)  1/2 of a truck. 
B)  2 trucks. 
C)  3 trucks. 
D)  6 cars - 3 trucks. 
E)  1 car. 
A)  1/2 of a truck. 
B)  2 trucks. 
C)  3 trucks. 
D)  6 cars - 3 trucks. 
E)  1 car. A

Question 4

-Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available.
Ii) Only two goods are considered.
Iii) The level of technology is fixed and unchanging.

Accepted Answer

A)  i only 
B)  ii only 
C)  i and iii 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  i and iii 
D)  ii and iii 
E)  i, ii, and iii

Question 5

On a production possibilities frontier, 500 kilograms of apples and 1200 kilograms of bananas can be produced while, at another point on the same frontier, 300 kilograms of apples and 1300 kilograms of bananas can be produced. Between these points, what is the opportunity cost of producing a kilogram of apples?

Accepted Answer

A)  0.5 of a kilogram of bananas 
B)  5/12 of a kilogram of bananas 
C)  2 kilograms of bananas 
D)  2 kilograms of apples 
E)  100 kilograms of bananas 
A)  0.5 of a kilogram of bananas 
B)  5/12 of a kilogram of bananas 
C)  2 kilograms of bananas 
D)  2 kilograms of apples 
E)  100 kilograms of bananas

Question 6

The production possibilities frontier is a graph showing the

Accepted Answer

A)  resources available for the economy's production use. 
B)  minimum combinations of goods and services that can be produced. 
C)  exact point of greatest efficiency for producing goods and services. 
D)  maximum combinations of goods and services that can be produced. 
E)  tradeoff between free lunches. 
A)  resources available for the economy's production use. 
B)  minimum combinations of goods and services that can be produced. 
C)  exact point of greatest efficiency for producing goods and services. 
D)  maximum combinations of goods and services that can be produced. 
E)  tradeoff between free lunches.

Question 7

Suppose a country operates on its production possibility frontier when it produces 1,000 books and 1,000 tables. The combination of ________ reflects ________.

Accepted Answer

A)  500 books and 500 tables; an attainable and efficient point. 
B)  1,000 books and 1,000 tables; a free lunch. 
C)  1,000 books and 1,500 tables; a free lunch. 
D)  1,000 books and 500 tables; an efficient point. 
E)  500 books and 1,000 tables; an inefficient but attainable point. 
A)  500 books and 500 tables; an attainable and efficient point. 
B)  1,000 books and 1,000 tables; a free lunch. 
C)  1,000 books and 1,500 tables; a free lunch. 
D)  1,000 books and 500 tables; an efficient point. 
E)  500 books and 1,000 tables; an inefficient but attainable point.

Question 8

The bowed out (concave) shape of the production possibilities curve implies that, as production of one good

Accepted Answer

A)  decreases, production of other goods decreases as well. 
B)  increases, society must forgo decreasing amounts of another good. 
C)  increases, society must forgo increasing amounts of another good. 
D)  increases, society can obtain a free lunch. 
E)  increases, production of other goods increases as well. 
A)  decreases, production of other goods decreases as well. 
B)  increases, society must forgo decreasing amounts of another good. 
C)  increases, society must forgo increasing amounts of another good. 
D)  increases, society can obtain a free lunch. 
E)  increases, production of other goods increases as well.

Question 9

The table above shows the production possibilities for an economy. The opportunity cost of a loaf of bread is ________ when moving from possibility B to possibility C.

Accepted Answer

A)  1/2 of a book 
B)  1 loaf of bread 
C)  200 books 
D)  100 loaves of bread 
E)  2 books 
A)  1/2 of a book 
B)  1 loaf of bread 
C)  200 books 
D)  100 loaves of bread 
E)  2 books

Question 10

As an economy increasingly specialises in producing one good, the opportunity cost of that good increases. The opportunity cost increases because

Accepted Answer

A)  as more of a good is produced the profit from its production must rise. 
B)  not all goods are equally valuable. 
C)  resources are not equally productive in all activities. 
D)  what must be paid to resources increases. 
E)  human wants are virtually unlimited. 
A)  as more of a good is produced the profit from its production must rise. 
B)  not all goods are equally valuable. 
C)  resources are not equally productive in all activities. 
D)  what must be paid to resources increases. 
E)  human wants are virtually unlimited.

Question 11

If the production possibilities frontier between bottled water and water in a jug is a straight line, which of the following statements would be correct?

Accepted Answer

A)  A large amount of unemployment must exist. 
B)  Producing more of one good gives the economy a free lunch. 
C)  There is no tradeoff between the two goods. 
D)  Resources are equally productive at producing either product. 
E)  There is no decrease in the production of one good when the production of the other is increased. 
A)  A large amount of unemployment must exist. 
B)  Producing more of one good gives the economy a free lunch. 
C)  There is no tradeoff between the two goods. 
D)  Resources are equally productive at producing either product. 
E)  There is no decrease in the production of one good when the production of the other is increased.

Question 12

For country Gamma, the opportunity cost for producing 1 computer is 10 tonnes of steel. For country Beta, the opportunity cost for producing 1 computer is 6 tonnes of steel. Which country has the comparative advantage in the production of steel?

Accepted Answer

A)  Gamma 
B)  Beta 
C)  Both have the comparative advantage in the production of steel. 
D)  Neither country has the comparative advantage in the production of steel. 
E)  More information is needed to determine which of the two nations has the comparative advantage. 
A)  Gamma 
B)  Beta 
C)  Both have the comparative advantage in the production of steel. 
D)  Neither country has the comparative advantage in the production of steel. 
E)  More information is needed to determine which of the two nations has the comparative advantage.

Question 13

In terms of a nation's production possibilities frontier, what impact does international trade have?

Accepted Answer

A)  International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported. 
B)  International trade shifts the nation's production possibilities frontier outward. 
C)  International trade shifts the nation's production possibilities frontier inward. 
D)  International trade shifts the production possibilities frontier outward for the goods that are imported and inward for the goods that are exported. 
E)  International trade allows the nation to consume at a point outside its production possibilities frontier. 
A)  International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported. 
B)  International trade shifts the nation's production possibilities frontier outward. 
C)  International trade shifts the nation's production possibilities frontier inward. 
D)  International trade shifts the production possibilities frontier outward for the goods that are imported and inward for the goods that are exported. 
E)  International trade allows the nation to consume at a point outside its production possibilities frontier.

Question 14

When all of the available factors of production are being efficiently employed, the

Accepted Answer

A)  economy is producing at a point beyond its PPF. 
B)  economy is producing at a point on its PPF. 
C)  PPF disappears. 
D)  economy is producing at a point within its PPF. 
E)  opportunity cost of changing production is infinite. 
A)  economy is producing at a point beyond its PPF. 
B)  economy is producing at a point on its PPF. 
C)  PPF disappears. 
D)  economy is producing at a point within its PPF. 
E)  opportunity cost of changing production is infinite.

Question 15

If a nation devotes a larger share of its current production to consumption goods, then

Accepted Answer

A)  it must produce at a point within its PPF. 
B)  its PPF will shift inward. 
C)  its PPF will shift outward. 
D)  some productive factors will become unemployed. 
E)  its economic growth will slow down. 
A)  it must produce at a point within its PPF. 
B)  its PPF will shift inward. 
C)  its PPF will shift outward. 
D)  some productive factors will become unemployed. 
E)  its economic growth will slow down.

Question 16

The opportunity cost of producing one more unit of a good is calculated by dividing the

Accepted Answer

A)  total quantity of that good by the total quantity of other good. 
B)  total quantity of the other good by the total quantity of the good whose opportunity cost we're calculating. 
C)  price of the good whose opportunity cost we are calculating by the number of units of the other good that are forgone. 
D)  increase in the quantity of that good by the decrease in the quantity of other good. 
E)  decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating. 
A)  total quantity of that good by the total quantity of other good. 
B)  total quantity of the other good by the total quantity of the good whose opportunity cost we're calculating. 
C)  price of the good whose opportunity cost we are calculating by the number of units of the other good that are forgone. 
D)  increase in the quantity of that good by the decrease in the quantity of other good. 
E)  decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating.

Question 17

The above figure shows the production possibility frontier for a country. What is the opportunity cost per tonne of rice to move from point D to E?

Accepted Answer

A)  333 bottles of wine 
B)  3,000 bottles of wine 
C)  3 bottles of wine 
D)  1/3 of a bottle of wine 
E)  None of the above answers is correct. 
A)  333 bottles of wine 
B)  3,000 bottles of wine 
C)  3 bottles of wine 
D)  1/3 of a bottle of wine 
E)  None of the above answers is correct.

Question 18

What is gained when people engage in specialisation and trade?

Accepted Answer

A)  There are no gains from specialisation and trade. 
B)  Specialisation and trade allow people to consume outside their individual production possibilities frontiers. 
C)  Specialisation and trade allow people to consume at a point on their production possibilities frontiers. 
D)  Specialisation and trade allow people to consume inside their production possibilities frontiers. 
E)  Specialisation and trade allow people to produce outside their individual production possibilities frontiers. 
A)  There are no gains from specialisation and trade. 
B)  Specialisation and trade allow people to consume outside their individual production possibilities frontiers. 
C)  Specialisation and trade allow people to consume at a point on their production possibilities frontiers. 
D)  Specialisation and trade allow people to consume inside their production possibilities frontiers. 
E)  Specialisation and trade allow people to produce outside their individual production possibilities frontiers.

Question 19

If Wendy can produce more of all goods than Tommy in an hour, then

Accepted Answer

A)  Wendy has a comparative advantage in all goods. 
B)  Tommy has an absolute advantage in all goods. 
C)  Only Tommy but not Wendy can benefit from trade between the two of them. 
D)  Wendy does not need to trade with Tommy in order to achieve the gains from trade. 
E)  Wendy has an absolute advantage in all goods. 
A)  Wendy has a comparative advantage in all goods. 
B)  Tommy has an absolute advantage in all goods. 
C)  Only Tommy but not Wendy can benefit from trade between the two of them. 
D)  Wendy does not need to trade with Tommy in order to achieve the gains from trade. 
E)  Wendy has an absolute advantage in all goods.

Question 20

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Scott's opportunity cost of producing 1 taco is

Accepted Answer

A)  20 pizzas. 
B)  1/2 of a pizza. 
C)  2 tacos. 
D)  1 pizza. 
E)  2 pizzas. 
A)  20 pizzas. 
B)  1/2 of a pizza. 
C)  2 tacos. 
D)  1 pizza. 
E)  2 pizzas.

The negative slope of the production possibilities frontier represents the idea

Which of the following is the best definition of economic growth?

Moving between two points on a PPF, a country gains 6 cars and forgoes 3 trucks. The opportunity cost of 1 car is

-Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available. Ii) Only two goods are considered. Iii) The level of technology is fixed and unchanging.

The production possibilities frontier is a graph showing the

Suppose a country operates on its production possibility frontier when it produces 1,000 books and 1,000 tables. The combination of reflects .

The bowed out (concave) shape of the production possibilities curve implies that, as production of one good

The table above shows the production possibilities for an economy. The opportunity cost of a loaf of bread is ________ when moving from possibility B to possibility C.

As an economy increasingly specialises in producing one good, the opportunity cost of that good increases. The opportunity cost increases because

If the production possibilities frontier between bottled water and water in a jug is a straight line, which of the following statements would be correct?

For country Gamma, the opportunity cost for producing 1 computer is 10 tonnes of steel. For country Beta, the opportunity cost for producing 1 computer is 6 tonnes of steel. Which country has the comparative advantage in the production of steel?

In terms of a nation's production possibilities frontier, what impact does international trade have?

When all of the available factors of production are being efficiently employed, the

If a nation devotes a larger share of its current production to consumption goods, then

The opportunity cost of producing one more unit of a good is calculated by dividing the

The above figure shows the production possibility frontier for a country. What is the opportunity cost per tonne of rice to move from point D to E?

What is gained when people engage in specialisation and trade?

If Wendy can produce more of all goods than Tommy in an hour, then

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Scott's opportunity cost of producing 1 taco is

Getting Started

The Australian and Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 3: The Economic Problem

The negative slope of the production possibilities frontier represents the idea

Which of the following is the best definition of economic growth?

Moving between two points on a PPF, a country gains 6 cars and forgoes 3 trucks. The opportunity cost of 1 car is

-Which of the following is an assumption used when drawing a production possibilities frontier? i. Human wants and desires are limited to what is available. Ii) Only two goods are considered. Iii) The level of technology is fixed and unchanging.

The production possibilities frontier is a graph showing the

Suppose a country operates on its production possibility frontier when it produces 1,000 books and 1,000 tables. The combination of ________ reflects ________.

The bowed out (concave) shape of the production possibilities curve implies that, as production of one good

The table above shows the production possibilities for an economy. The opportunity cost of a loaf of bread is ________ when moving from possibility B to possibility C.

As an economy increasingly specialises in producing one good, the opportunity cost of that good increases. The opportunity cost increases because

If the production possibilities frontier between bottled water and water in a jug is a straight line, which of the following statements would be correct?

For country Gamma, the opportunity cost for producing 1 computer is 10 tonnes of steel. For country Beta, the opportunity cost for producing 1 computer is 6 tonnes of steel. Which country has the comparative advantage in the production of steel?

In terms of a nation's production possibilities frontier, what impact does international trade have?

When all of the available factors of production are being efficiently employed, the

If a nation devotes a larger share of its current production to consumption goods, then

The opportunity cost of producing one more unit of a good is calculated by dividing the

The above figure shows the production possibility frontier for a country. What is the opportunity cost per tonne of rice to move from point D to E?

What is gained when people engage in specialisation and trade?

If Wendy can produce more of all goods than Tommy in an hour, then

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Scott's opportunity cost of producing 1 taco is

Getting Started

The Australian and Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Suppose a country operates on its production possibility frontier when it produces 1,000 books and 1,000 tables. The combination of reflects .