Question 1

Which of the following statements, if any, is correct for a nation which is producing only consumption and capital goods?

Accepted Answer

A) Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate. 
B) Other things equal, the more capital goods a nation produces, the greater will be its future growth rate. 
C) There is no general relationship between the current division of output between consumer and capital goods and the future growth rate. 
D) None of the above statements is correct. 
A) Other things equal, the more consumer goods a nation produces, the greater will be its future growth rate. 
B) Other things equal, the more capital goods a nation produces, the greater will be its future growth rate. 
C) There is no general relationship between the current division of output between consumer and capital goods and the future growth rate. 
D) None of the above statements is correct.

Question 2

International specialization and trade:

Accepted Answer

A) allow a nation to get more of a desired good at less sacrifice of some other good. 
B) can allow an economy to circumvent the output limits imposed by its domestic production possibilities curve. 
C) Has the same effect as having more and better resources. 
D) All of the above. 
A) allow a nation to get more of a desired good at less sacrifice of some other good. 
B) can allow an economy to circumvent the output limits imposed by its domestic production possibilities curve. 
C) Has the same effect as having more and better resources. 
D) All of the above.

Question 3

Refer to the above production possibilities curves.Given production possibilities curve (a), point Y indicates that society is failing to use available resources efficiently.

Accepted Answer

A) True 
 B)False

Question 4

Opportunity cost is best defined as:

Accepted Answer

A) the monetary price of any productive resource. 
B) the amount of labour which must be used to produce one unit of any product. 
C) the ratio of the prices of imported goods to the prices of exported goods. 
D) the amount of one product which must be given up to produce one more unit of another product. 
A) the monetary price of any productive resource. 
B) the amount of labour which must be used to produce one unit of any product. 
C) the ratio of the prices of imported goods to the prices of exported goods. 
D) the amount of one product which must be given up to produce one more unit of another product.

Question 5

In constructing models, economists:

Accepted Answer

A) make simplifying assumptions. 
B) include all available information. 
C) must use mathematical equations. 
D) attempt to duplicate the real world. 
A) make simplifying assumptions. 
B) include all available information. 
C) must use mathematical equations. 
D) attempt to duplicate the real world.

Question 6

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.Refer to the above information.Which of the following is an accurate verbal statement of the described relationship?

Accepted Answer

A) There is no regular or dependable relationship between business investment and the interest rate. 
B) The amount of business investment is unaffected by changes in the interest rate. 
C) Investment spending by businesses varies inversely with the interest rate. 
D) Investment spending by businesses varies directly with the interest rate. 
A) There is no regular or dependable relationship between business investment and the interest rate. 
B) The amount of business investment is unaffected by changes in the interest rate. 
C) Investment spending by businesses varies inversely with the interest rate. 
D) Investment spending by businesses varies directly with the interest rate.

Question 7

Refer to the diagram below.The concave shape of each production possibilities curve indicates that:

Accepted Answer

A) resources are perfectly substitutable. 
B) wants are virtually unlimited. 
C) prices are constant. 
D) resources are not equally suited for alternative uses. 
A) resources are perfectly substitutable. 
B) wants are virtually unlimited. 
C) prices are constant. 
D) resources are not equally suited for alternative uses.

Question 8

Scarcity in relation to wants means you face trade-offs; therefore, having to make choices is which of the ten key concepts to retain for a lifetime?

Accepted Answer

A) Facing trade-offs 
B) Opportunity cost 
C) Choosing a little more or a little less 
D) The influence of incentives 
A) Facing trade-offs 
B) Opportunity cost 
C) Choosing a little more or a little less 
D) The influence of incentives

Question 9

Macroeconomics approaches the study of economics from the viewpoint of:

Accepted Answer

A) the entire economy. 
B) governmental units. 
C) the operation of specific product and resource markets. 
D) individual firms. 
A) the entire economy. 
B) governmental units. 
C) the operation of specific product and resource markets. 
D) individual firms.

Question 10

The entrepreneur's sole function is to combine other resources (land, labour, and capital) in the production of some good or service.

Accepted Answer

A) True 
 B)False

Question 11

The typical production possibilities curve is:

Accepted Answer

A) an upward sloping line which is concave to the origin. 
B) a downward sloping line which is convex to the origin. 
C) a downward sloping line which is concave to the origin. 
D) a straight upward sloping line. 
A) an upward sloping line which is concave to the origin. 
B) a downward sloping line which is convex to the origin. 
C) a downward sloping line which is concave to the origin. 
D) a straight upward sloping line.

Question 12

Assume that a change in government policy results in the increased production of both consumer goods and investment goods.It can be concluded that:

Accepted Answer

A) the economy was suffering from unemployment and/or the inefficient use of resources before the policy change. 
B) the economy's production possibilities curve has been shifted to the left as a result of the policy decision. 
C) this economy's production possibilities curve is convex (bowed inward) as viewed from the origin. 
D) the law of increasing opportunity costs does not apply in this society. 
A) the economy was suffering from unemployment and/or the inefficient use of resources before the policy change. 
B) the economy's production possibilities curve has been shifted to the left as a result of the policy decision. 
C) this economy's production possibilities curve is convex (bowed inward) as viewed from the origin. 
D) the law of increasing opportunity costs does not apply in this society.

Question 13

The law of increasing opportunity costs exists because:

Accepted Answer

A) resources are not equally efficient in producing various goods. 
B) the value of the dollar has diminished historically because of persistent inflation. 
C) wage rates invariably rise as the economy approaches full employment. 
D) consumers tend to value any good more highly when they have little of it. 
A) resources are not equally efficient in producing various goods. 
B) the value of the dollar has diminished historically because of persistent inflation. 
C) wage rates invariably rise as the economy approaches full employment. 
D) consumers tend to value any good more highly when they have little of it.

Question 14

Which of the following would be most likely to shift the production possibilities curve to the right?

Accepted Answer

A) a sudden and substantial expansion of consumer wants 
B) an improvement in the literacy level and general level of education 
C) a decline in the size of the population and labour force 
D) shifting resources from butter to gun production 
A) a sudden and substantial expansion of consumer wants 
B) an improvement in the literacy level and general level of education 
C) a decline in the size of the population and labour force 
D) shifting resources from butter to gun production

Question 15

The construction of a production possibilities curve assumes:

Accepted Answer

A) the quantities of all resources are fixed. 
B) technology is fixed. 
C) full employment and full production are being realized. 
D) all of the above. 
A) the quantities of all resources are fixed. 
B) technology is fixed. 
C) full employment and full production are being realized. 
D) all of the above.

Question 16

The economic concept that serves as the basis for the study of economics is:

Accepted Answer

A) inflation. 
B) unemployment. 
C) money. 
D) scarcity. 
A) inflation. 
B) unemployment. 
C) money. 
D) scarcity.

Question 17

A country can achieve some combination of goods outside its production possibilities curve by:

Accepted Answer

A) idling some of its resources. 
B) specializing and engaging in international trade. 
C) buying the debt (bonds and stocks) of foreign nations. 
D) producing more consumption goods and fewer capital goods. 
A) idling some of its resources. 
B) specializing and engaging in international trade. 
C) buying the debt (bonds and stocks) of foreign nations. 
D) producing more consumption goods and fewer capital goods.

Question 18

Deltonia produces both consumer and capital goods.If it reduces the percentage of its output devoted to capital goods, then:

Accepted Answer

A) its rate of growth will tend to decline. 
B) its production possibilities curve will necessarily shift to the left. 
C) it must also reduce the percentage of its output devoted to consumer goods. 
D) its rate of growth will tend to increase. 
A) its rate of growth will tend to decline. 
B) its production possibilities curve will necessarily shift to the left. 
C) it must also reduce the percentage of its output devoted to consumer goods. 
D) its rate of growth will tend to increase.

Question 19

In drawing a budget line it is assumed that:

Accepted Answer

A) consumer preferences are fixed. 
B) the prices of the two products are variable. 
C) money income is fixed. 
D) consumer willingness to substitute between the two products is fixed. 
A) consumer preferences are fixed. 
B) the prices of the two products are variable. 
C) money income is fixed. 
D) consumer willingness to substitute between the two products is fixed.

Question 20

Refer to the diagram below.Points A, B, C, D, and E show:

Accepted Answer

A) that the opportunity cost of bicycles increases, while that of computers is constant. 
B) combinations of bicycles and computers which society can produce by using its resources efficiently. 
C) that the opportunity cost of computers increases, while that of bicycles is constant. 
D) that society's demand for computers is greater than its demand for bicycles. 
A) that the opportunity cost of bicycles increases, while that of computers is constant. 
B) combinations of bicycles and computers which society can produce by using its resources efficiently. 
C) that the opportunity cost of computers increases, while that of bicycles is constant. 
D) that society's demand for computers is greater than its demand for bicycles.

Exam 1: B: Limits, Alternatives, and Choices

Which of the following statements, if any, is correct for a nation which is producing only consumption and capital goods?

International specialization and trade:

Refer to the above production possibilities curves.Given production possibilities curve (a), point Y indicates that society is failing to use available resources efficiently.

Opportunity cost is best defined as:

In constructing models, economists:

Refer to the diagram below.The concave shape of each production possibilities curve indicates that:

Scarcity in relation to wants means you face trade-offs; therefore, having to make choices is which of the ten key concepts to retain for a lifetime?

Macroeconomics approaches the study of economics from the viewpoint of:

The entrepreneur's sole function is to combine other resources (land, labour, and capital) in the production of some good or service.

The typical production possibilities curve is:

Assume that a change in government policy results in the increased production of both consumer goods and investment goods.It can be concluded that:

The law of increasing opportunity costs exists because:

Which of the following would be most likely to shift the production possibilities curve to the right?

The construction of a production possibilities curve assumes:

The economic concept that serves as the basis for the study of economics is:

A country can achieve some combination of goods outside its production possibilities curve by:

Deltonia produces both consumer and capital goods.If it reduces the percentage of its output devoted to capital goods, then:

In drawing a budget line it is assumed that:

Refer to the diagram below.Points A, B, C, D, and E show:

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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