Exam 1: First Principles

If the production possibility frontier is a straight line, which of the following is true? A.Opportunity costs are constant. B.The firm faces increasing costs. C.The firm faces decreasing costs. D.There is no trade-off between the two goods represented.

If an economy produces the desired mix of goods from its available resources, then this mix of goods is: A.allocatively efficient. B.both productively and allocatively efficient. C.productively efficient. D.neither productively nor allocatively efficient.

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is: A.bowed out from the origin. B.bowed in toward the origin. C.a straight line. D.a vertical line.

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If an economy is producing at alternative W, the opportunity cost of producing at X is unit(s) of consumer goods per period. A.0 B.1 C.4 D.18

Economic models that make unrealistic assumptions may be useful in analyzing some economic problems.

(Table: Comparative Advantage I) Look at the table Comparative Advantage I.Finland has an absolute advantage in producing: A.cell phones only. B.herring only. C.both cell phones and herring. D.neither cell phones nor herring.

Unemployment decreased to its lowest level in 10 years last month.This statement is an example of: A.an absolute (dis)advantage. B.a positive economic statement. C.a normative economic D.statement.a value judgment.

Figure: Wine and Wheat (Figure: Wine and Wheat) Look at the figure Wine and Wheat.What is the opportunity cost of moving from only producing wheat to only producing wine? A.3 tons of wheat B.6 tons of wheat C.9 tons of wheat D.15 tons of wheat

The current rate of unemployment of 9% is too high.This is a statement. A.normative B.ceteris paribus C.positive D.marginal

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale.In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies.Based on this information, has the comparative advantage in making brownies and has the comparative advantage in making cookies. A.Mark; Julie B.Mark; Mark C.Julie; Mark D.Julie; Julie

Technological improvements will: A.leave the production possibility frontier unchanged. B.shift the production possibility frontier inward. C.shift the production possibility frontier outward. D.necessarily lead to increased unemployment.

Positive economics is the branch of economics that makes prescriptions about the way the economy should work.

Figure: Consumer and Capital Goods (Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods.Technological improvements will likely: A.shift the production possibility frontier inward to curve B.1.shift the production possibility frontier outward to curve 2. C.lead to increased unemployment. D.leave the production possibility frontier unchanged.

The production possibility frontier is bowed out from the origin because: A.resources are not equally suited for the production of both goods. B.resources are scarce. C.economic growth leads to inefficiency. D.resources are inefficiently used.

Which of the following is not a factor of production? A.labor B.machines and C.buildings land D.money

(Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I.If the economy produces 4 units of consumer goods per period, it also can produce at most ________ units of capital goods per period. A.30 B.28 C.10 D.18

Figure: Tom's Production Possibilities (Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, which point or points represent a combination of coconuts and fish not feasible for Tom to produce at this time?

Labor and capital are the only two factors of production.

Consider a point within a production possibility frontier for a simple economy that produces only two goods, X and Y.Why is this point described as feasible but not efficient?

An example of a positive statement is: A.the rate of unemployment is 4%. B.a high rate of economic growth is good for the country. C.everyone in the country should be covered by national health insurance. D.baseball players should not be paid higher salaries than the president of the United States.