Question 1

Why does the marginal benefit curve have a negative slope?

Accepted Answer

Each successive increase in the consumption of any good or service provides a lower level of satisfaction, or benefit, than the preceding unit of consumption. For a specific example, think of drinking water on a hot day. What is the first glass worth? How about the second and third? The marginal benefit is the benefit from each additional glass of water and, as the example indicates, the marginal benefit decreases as the amount of the good increases.

Question 2

When moving along the production possibilities frontier, opportunity cost is measured as the

Accepted Answer

A)  increase in the quantity produced of one good divided by the decrease in the quantity produced of another good. 
B)  decrease in the quantity produced of one good divided by the increase in the quantity produced of another good. 
C)  quantity produced of one good divided by the quantity produced of another good. 
D)  quantity produced of one good multiplied by the quantity produced of another good. 
A)  increase in the quantity produced of one good divided by the decrease in the quantity produced of another good. 
B)  decrease in the quantity produced of one good divided by the increase in the quantity produced of another good. 
C)  quantity produced of one good divided by the quantity produced of another good. 
D)  quantity produced of one good multiplied by the quantity produced of another good. B

Question 3

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

Accepted Answer

A)  the horizontal intercept rightward and the vertical intercept upward. 
B)  the horizontal intercept rightward but does not shift the vertical intercept. 
C)  the vertical intercept upward but does not shift the horizontal intercept. 
D)  neither the horizontal intercept nor the vertical intercept. 
A)  the horizontal intercept rightward and the vertical intercept upward. 
B)  the horizontal intercept rightward but does not shift the vertical intercept. 
C)  the vertical intercept upward but does not shift the horizontal intercept. 
D)  neither the horizontal intercept nor the vertical intercept. C

Question 4

Increasing opportunity cost while moving along a production possibilities frontier is the result of

Accepted Answer

A)  taxes. 
B)  firms' needs to produce profits. 
C)  the fact that it is more difficult to use resources efficiently the more society produces. 
D)  the fact that resources are not equally productive in alternative uses. 
A)  taxes. 
B)  firms' needs to produce profits. 
C)  the fact that it is more difficult to use resources efficiently the more society produces. 
D)  the fact that resources are not equally productive in alternative uses.

Question 5

-The table above presents the production possibilities of Farmer Brown. Use these data to calculate Farmer Brown's opportunity cost of additional beef as Farmer Brown moves from point A to B to C to D. Also use the data to calculate Farmer Brown's opportunity cost of additional wheat as Farmer Brown moves from point D to C to B to A. Based on these costs, does Farmer Brown use resources that are more productive in one activity than the other? Explain your answer.

Accepted Answer

The opportunity cost of a pound of beef

Question 6

Using the production possibilities frontier model, unemployment is described as producing at a point

Accepted Answer

A)  on the exact middle of the PPF curve. 
B)  on either end of the PPF curve. 
C)  inside the PPF curve. 
D)  outside the PPF curve. 
A)  on the exact middle of the PPF curve. 
B)  on either end of the PPF curve. 
C)  inside the PPF curve. 
D)  outside the PPF curve.

Question 7

-Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?

Accepted Answer

A)  point F 
B)  point G 
C)  point H 
D)  point I 
A)  point F 
B)  point G 
C)  point H 
D)  point I

Question 8

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

Accepted Answer

A)  Tom trades sandwiches in exchange for eggs. 
B)  Jerry trades sandwiches in exchange for eggs. 
C)  they trade, no matter who trades sandwiches and who eggs. 
D)  they don't trade. 
A)  Tom trades sandwiches in exchange for eggs. 
B)  Jerry trades sandwiches in exchange for eggs. 
C)  they trade, no matter who trades sandwiches and who eggs. 
D)  they don't trade.

Question 9

As an economy's capital stock increases, the economy

Accepted Answer

A)  generally experiences increased unemployment of other resources, such as labor. 
B)  generally decides to engage in international trade. 
C)  experiences economic growth. 
D)  gains an absolute advantage in the production of capital goods. 
A)  generally experiences increased unemployment of other resources, such as labor. 
B)  generally decides to engage in international trade. 
C)  experiences economic growth. 
D)  gains an absolute advantage in the production of capital goods.

Question 10

An increase in the nation's capital stock will

Accepted Answer

A)  shift the PPF outward. 
B)  cause a movement along the PPF up and to the left. 
C)  cause a movement along the PPF down and to the right. 
D)  move the nation from producing within the PPF to producing at a point closer to the PPF. 
A)  shift the PPF outward. 
B)  cause a movement along the PPF up and to the left. 
C)  cause a movement along the PPF down and to the right. 
D)  move the nation from producing within the PPF to producing at a point closer to the PPF.

Question 11

BAE, a British defense company, has the contract to produce Tornado aircraft for the Royal Air Force. BAE is producing the aircraft at the lowest possible cost. If the RAF orders one more Tornado, there will be

Accepted Answer

A)  a decrease in opportunity costs as average costs decrease. 
B)  a misallocation of resources. 
C)  an increase in opportunity cost for Tornados. 
D)  an outward shift in the PPF. 
A)  a decrease in opportunity costs as average costs decrease. 
B)  a misallocation of resources. 
C)  an increase in opportunity cost for Tornados. 
D)  an outward shift in the PPF.

Question 12

The production possibilities frontier is

Accepted Answer

A)  upward sloping and reflects unlimited choices. 
B)  upward sloping and reflects tradeoffs in choices. 
C)  downward sloping and reflects unlimited choices. 
D)  downward sloping and reflects tradeoffs in choices. 
A)  upward sloping and reflects unlimited choices. 
B)  upward sloping and reflects tradeoffs in choices. 
C)  downward sloping and reflects unlimited choices. 
D)  downward sloping and reflects tradeoffs in choices.

Question 13

The rights of an owner to use and exchange property are

Accepted Answer

A)  capitalist rights. 
B)  socialist rights. 
C)  property rights. 
D)  money rights. 
A)  capitalist rights. 
B)  socialist rights. 
C)  property rights. 
D)  money rights.

Question 14

-Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to point ________ means that the country ________.

Accepted Answer

A)  d; must give up 20 million capital goods 
B)  e; is not operating efficiently 
C)  d; gives up 10 million consumer goods 
D)  b; is producing at an inefficient point 
A)  d; must give up 20 million capital goods 
B)  e; is not operating efficiently 
C)  d; gives up 10 million consumer goods 
D)  b; is producing at an inefficient point

Question 15

Households are buyers in factor markets and sellers in goods markets.

Accepted Answer

A) True 
 B)False

Question 16

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is

Accepted Answer

A)  $50. 
B)  $40. 
C)  $30. 
D)  an amount not given in the answers above. 
A)  $50. 
B)  $40. 
C)  $30. 
D)  an amount not given in the answers above.

Question 17

If marginal benefit is greater than marginal cost for the production of cars, to reach the allocative efficient quantity of cars, the production of cars must be increased.

Accepted Answer

A) True 
 B)False

Question 18

The production possibilities frontier is the boundary between those combination of goods and services that can be

Accepted Answer

A)  produced and those that can be consumed. 
B)  consumed domestically and those that can be consumed by foreigners. 
C)  produced and those that cannot be produced. 
D)  consumed and those that cannot be produced. 
A)  produced and those that can be consumed. 
B)  consumed domestically and those that can be consumed by foreigners. 
C)  produced and those that cannot be produced. 
D)  consumed and those that cannot be produced.

Question 19

Considering a PPF with health care services on the vertical axis and other goods and services on the horizontal axis, the increasing production of health care services in the United States as a result of the aging population represents

Accepted Answer

A)  a movement upward along the PPF. 
B)  an outward shift of the PPF from the vertical axis. 
C)  an outward shift of the PPF from the horizontal axis. 
D)  a movement downward along the PPF. 
A)  a movement upward along the PPF. 
B)  an outward shift of the PPF from the vertical axis. 
C)  an outward shift of the PPF from the horizontal axis. 
D)  a movement downward along the PPF.

Question 20

What factors generate economic growth?

Accepted Answer

Two key factors create economic growth:

Why does the marginal benefit curve have a negative slope?

When moving along the production possibilities frontier, opportunity cost is measured as the

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

Increasing opportunity cost while moving along a production possibilities frontier is the result of

Using the production possibilities frontier model, unemployment is described as producing at a point

-Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

As an economy's capital stock increases, the economy

An increase in the nation's capital stock will

BAE, a British defense company, has the contract to produce Tornado aircraft for the Royal Air Force. BAE is producing the aircraft at the lowest possible cost. If the RAF orders one more Tornado, there will be

The production possibilities frontier is

The rights of an owner to use and exchange property are

-Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to point means that the country .

Households are buyers in factor markets and sellers in goods markets.

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is

If marginal benefit is greater than marginal cost for the production of cars, to reach the allocative efficient quantity of cars, the production of cars must be increased.

The production possibilities frontier is the boundary between those combination of goods and services that can be

Considering a PPF with health care services on the vertical axis and other goods and services on the horizontal axis, the increasing production of health care services in the United States as a result of the aging population represents

What factors generate economic growth?

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 2: The Economic Problem

Why does the marginal benefit curve have a negative slope?

When moving along the production possibilities frontier, opportunity cost is measured as the

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

Increasing opportunity cost while moving along a production possibilities frontier is the result of

Using the production possibilities frontier model, unemployment is described as producing at a point

-Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

As an economy's capital stock increases, the economy

An increase in the nation's capital stock will

BAE, a British defense company, has the contract to produce Tornado aircraft for the Royal Air Force. BAE is producing the aircraft at the lowest possible cost. If the RAF orders one more Tornado, there will be

The production possibilities frontier is

The rights of an owner to use and exchange property are

-Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to point ________ means that the country ________.

Households are buyers in factor markets and sellers in goods markets.

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is

If marginal benefit is greater than marginal cost for the production of cars, to reach the allocative efficient quantity of cars, the production of cars must be increased.

The production possibilities frontier is the boundary between those combination of goods and services that can be

Considering a PPF with health care services on the vertical axis and other goods and services on the horizontal axis, the increasing production of health care services in the United States as a result of the aging population represents

What factors generate economic growth?

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to point means that the country .