Deck 2: The Economic Problem

Question 1

The production possibilities frontier illustrates

A) all goods that can be produced by an economy
B) all goods and services that are desired but cannot be produced due to scarce resources.
C) all possible production of capital goods
D) the combination of goods and services that can be produced efficiently

Answer 1

D

Question 2

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

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

Answer 2

A

Question 3

A production possibilities frontier figure does NOT illustrate

A) attainable and unattainable points.
B) opportunity cost.
C) the limits on production imposed by our limited resources and technology.
D) the exchange of one good or service for another.

Answer 3

D

Question 4

Production efficiency occurs when production .

A) is at a point beyond the production possibilities frontier
B) is on the production possibilities frontier
C) is at any attainable point
D) is on the production possibilities frontier or inside it

Question 5

Which of the following is NOT illustrated by a production possibilities frontier?

A) who gets the goods
B) necessity for choice
C) opportunity cost
D) scarcity

Question 6

The production possibilities frontier separates _ _.

A) the quantities of goods and services that can be produced from those that cannot be produced
B) the combinations of goods that people value and those that they don't
C) the types of goods that can be attained from those that can't be attained
D) the goods and services that people want from those that they do not want

Question 7

The production possibilities frontier represents

A) the maximum levels of production that can be attained.
B) the maximum rate of growth of capital and labor in a country.
C) combinations of goods and services among which consumers are indifferent.
D) the maximum amount of labor and capital available to society.

Question 8

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is his production possibilities frontier.

A) producing outside
B) producing on
C) producing inside
D) moving along

Question 9

Which of the following statements regarding the production possibilities frontier is true?

A) Points on the frontier are less efficient than points inside the frontier.
B) Points outside the frontier are attainable.
C) Points inside the frontier are attainable.
D) None of the above because all of the above statements are false.

Question 10

A production possibilities frontier (PPF)

A) shows combinations of two goods or services that are attainable with given resources.
B) involves a tradeoff between what is wanted and what is needed.
C) identifies the combination of two goods or services that should be produced.
D) defines a boundary between what is needed and what is not needed.

Question 11

The production possibilities frontier

A) depicts the boundary between those combinations of goods and services that can be produced and those that cannot given resources and the current state of technology.
B) is a model that assumes there is no scarcity and no opportunity cost.
C) shows how many goods and services are consumed by each person in a country.
D) is a graph with price on the vertical axis and income on the horizontal axis.

Question 12

The production possibilities frontier

A) refers to the technology used in such goods as computers and military aircraft.
B) marks the boundary between attainable combinations of goods and services and unattainable combinations.
C) is also called the supply curve.
D) once applied to U.S. technology but now refers to Japanese technology.

Question 13

The production possibilities frontier itself shows

A) the maximum amount of resources available at any given time.
B) combinations of goods and services that do not fully use available resources.
C) the maximum levels of production that can be attained.
D) the maximum rate of growth of output possible for an economy.

Question 14

The production possibilities frontier is the boundary between

A) those combinations of goods and services that can be produced and those that cannot.
B) those resources that are limited and those that are unlimited.
C) those combinations of goods and services that can be produced and those that can be consumed.
D) those wants that are limited and those that are unlimited.

Question 15

Any production point outside the production possibilities frontier is

A) associated with unused resources.
B) attainable only if prices rise.
C) attainable only if prices fall.
D) unattainable.

Question 16

A point outside a production possibilities frontier indicates

A) that resources are being used very efficiently.
B) an output combination that society cannot attain given its current level of resources and technology.
C) that both goods are characterized by increasing costs.
D) that resources are not being used efficiently.

Question 17

When production is efficient, .

A) we can satisfy our all wants
B) the opportunity cost is as low as possible
C) our choice of the goods can be either on or within the production possibilities frontier
D) we face a tradeoff and incur an opportunity cost

Question 18

Which of the following is NOT true concerning a society's production possibilities frontier (PPF)?

A) It reveals the maximum amount of any two goods that can be produced from a given quantity of resources.
B) Tradeoffs occur when moving along a PPF.
C) Consumers will receive equal benefits from the two goods illustrated in the PPF.
D) Production efficiency occurs when production is on the frontier itself.

Question 19

A production possibilities frontier illustrates the maximum amount of two different goods that can be produced if

A) low- skilled workers can be prevented from taking jobs away from high- skilled workers.
B) society is using all its resources in the most efficient manner possible.
C) the prices of both goods are held constant.
D) the prices of both goods are identical.

Question 20

The production possibilities frontier is

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

Question 21

On the vertical axis, the production possibilities frontier shows ; on the horizontal axis, the production possibilities frontier shows .

A) the quantity of a good; a weighted average of resources used to produce the good
B) the quantity of one good; the quantity of another good
C) the quantity of a good; the number of workers employed to produce the good
D) the quantity of a good; the price of the good

Question 22

Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he

A) values good A more than good B.
B) values good B more than good A.
C) can increase production of both goods with no increase in resources.
D) is fully using all his resources.

Question 23

A situation in which some resources are NOT fully utilized is represented in a production possibilities frontier diagram by

A) the midpoint of the production possibilities frontier.
B) a point inside the production possibilities frontier.
C) any point on either the horizontal or the vertical axis.
D) a point outside the production possibilities frontier.

Question 24

A point inside a production possibilities frontier

A) is more efficient than points on the production possibilities frontier.
B) could indicate that some resources are unemployed.
C) is unattainable.
D) implies that too much capital and not enough labor are being used.

Question 25

The figure above shows Roger's production possibilities frontier. Point a is an point and production is .

A) attainable; inefficient
B) attainable; efficient
C) unattainable; inefficient
D) unattainable; efficient

Question 26

Any point on a production possibilities frontier (PPF) itself is

A) equitable.
B) inefficient.
C) efficient.
D) unattainable.

Question 27

Production efficiency can be defined as

A) being able to produce more of one good only if less of another is produced.
B) producing outside the production possibilities frontier.
C) minimizing opportunity cost.
D) providing for the immediate needs of the greatest proportion of the population.

Question 28

A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid

A) if the United States is producing at a point inside its production possibilities frontier.
B) if the United States is producing at a point beyond its production possibilities frontier.
C) only if the production possibilities frontier shifts rightward.
D) if the United States is producing at a point on its production possibilities frontier.

Question 29

Production efficiency requires that

A) production is at a point on the PPF.
B) resources are assigned to the task for which they are the best match.
C) it is impossible to produce more of one good without producing less of some other good.
D) All of the above answers are correct.

Question 30

Suppose the country of Popcorn produces only jets and corn. If Popcorn cannot produce any more jets without giving up corn, we say that Popcorn has achieved

A) production efficiency.
B) the highest opportunity cost.
C) the lowest marginal cost.
D) the highest marginal benefit.

Question 31

Jane produces only corn and cloth. Taking account of her preferences for corn and cloth

A) makes her production possibilities frontier flatter.
B) does not affect her production possibilities frontier.
C) makes her production possibilities frontier straighter.
D) makes her production possibilities frontier steeper.

Question 32

Production points inside the production possibilities frontier

A) are unattainable.
B) are attainable only with the full utilization of all resources.
C) result in more rapid growth.
D) are associated with unused or misallocated resources.

Question 33

A reduction in the amount of unemployment

A) moves the economy's point of production along the production possibilities frontier.
B) moves the economy's point of production further away from the production possibilities frontier.
C) moves the economy's point of production closer to the production possibilities frontier.
D) shifts the production possibilities frontier outward.

Question 34

When resources are assigned to inappropriate tasks, that is, tasks for which they are not the best match, the result will be producing at a point

A) where the slope of the PPF is zero.
B) outside the PPF.
C) inside the PPF.
D) where the slope of the PPF is positive.

Question 35

Scarcity is represented on a production possibilities frontier figure by

A) technological progress.
B) the amount of the good on the horizontal axis forgone.
C) the fact that there are only two goods in the diagram.
D) the fact there are attainable and unattainable points.

Question 36

A country that must decrease production of one good in order to increase the production of another

A) must be producing on its production possibilities frontier.
B) must not have private ownership of property.
C) must be using resources inefficiently.
D) must be producing beyond its production possibilities frontier.

Question 37

If an economy is operating at a point inside the production possibilities frontier, then

A) economic policy must retard further growth of the economy.
B) society's resources are being used to produce too many consumer goods.
C) the PPF curve will shift inward.
D) society's resources are being inefficiently utilized.

Question 38

A point inside a production possibilities frontier

A) could indicate that resources are misallocated.
B) implies that too much labor and not enough capital is being used.
C) reflects the fact that more technology needs to be developed to fully employ all resources.
D) is more efficient than a point on the production possibilities frontier.

Question 39

A society that is on its production possibilities frontier is

A) under- utilizing its resources.
B) fully utilizing its productive resources.
C) inefficient.
D) consuming too much output.

Question 40

The above figure illustrates that if this country wishes to move from its current production point (labeled "Current") and have 10 more tons of food, it can do this by producing

A) 5 fewer tons of clothing.
B) 10 more tons of clothing.
C) 10 fewer tons of clothing.
D) 5 more tons of clothing.

Question 41

Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop "proper social attitudes." This policy probably caused China to produce

A) at an inappropriate point along its production possibilities frontier.
B) inside its production possibilities frontier.
C) outside its production possibilities frontier with respect to food, but inside with respect to high- technology goods.
D) inside its production possibilities frontier with respect to food, but outside with respect to high- technology goods.

Question 42

Production efficiency is achieved when

A) the ability is gained to produce goods and services that are desired beyond the PPF boundary
B) all goods and services desired by consumers can be produced in the economy
C) producing one more unit of one good cannot occur without producing less of some other good.
D) producing inside the production possibilities frontier

Question 43

Refer to the production possibilities frontier in the figure above. If the country moves from point a
To point c, the opportunity cost of the move is

A) 10 million consumption goods.
B) 10 million capital goods.
C) 30 million capital goods.
D) 20 million capital goods.

Question 44

In the figure above, moving from production at point d to production at point a requires

A) a decrease in unemployment.
B) technological change.
C) decreasing the output of consumer goods in order to boost the output of capital goods.
D) both capital accumulation and a decrease in unemployment.

Question 45

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 _ .

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

Question 46

If production point of two goods is inside the production possibilities frontier

A) in order to produce more of one good, less of the other must be produced.
B) it is not possible to produce more of both goods
C) production is inefficient.
D) production is in the "unattainable" region.

Question 47

Point C on the production possibilities frontier in the above diagram illustrates

A) all goods and services that are desired but cannot be produced due to scarce resources.
B) a point with maximum and efficient production of Goods A and Goods B
C) an underutilization of resources
D) a combination of goods and services that cannot be produced efficiently

Question 48

Refer to the production possibilities frontier in the figure above. Which production point is unattainable?

A) Point a
B) Point b
C) Point c
D) Point e

Question 49

In the above figure, which point represents an unattainable production combination of the two goods?

A) Point D
B) Point L
C) Point N
D) Point C

Question 50

A tradeoff is illustrated by

A) a point outside the PPF.
B) a change in the slope of the PPF.
C) a point inside the PPF.
D) the negative slope of the PPF.

Question 51

When producing goods and services, tradeoffs exist because

A) society has only a limited amount of productive resources.
B) human wants and needs are limited at a particular point in time.
C) not all production is efficient.
D) buyers and sellers often must negotiate prices.

Question 52

A tradeoff is

A) represented by a point outside a PPF.
B) a constraint that requires giving up one thing to get another.
C) a transaction at a price either above or below the equilibrium price.
D) represented by a point inside a PPF.

Question 53

If a society is operating at a point inside its production possibilities frontier, then this society's

A) resources are being used in the most efficient manner.
B) economy will grow too fast.
C) production possibilities frontier will shift rightward.
D) resources are being inefficiently utilized.

Question 54

A nation produces at a point inside its PPF

A) when it produces inefficiently.
B) when its PPF is bowed out.
C) when it trades with other nations.
D) never.

Question 55

A society that is producing on its production possibilities frontier is

A) not utilizing all of its resources.
B) fully utilizing all of its productive resources.
C) producing too much output.
D) not being technologically efficient.

Question 56

In the above figure, which point represents an attainable but inefficient production point?

A) Point D
B) Point L
C) Point C
D) Point N

Question 57

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

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

Question 58

Refer to the production possibilities frontier in the figure above. Which production point indicates that resources are NOT fully utilized or are misallocated?

A) Point a
B) Point b
C) Point c
D) Point e

Question 59

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

A) be using resources inefficiently today, but will be more efficient in the future.
B) must be producing outside the production possibilities frontier and will continue to do so in the future.
C) must not have private ownership of property and will have to follow planning authorities' decisions today and in the future.
D) be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods.

Question 60

Refer to the production possibilities frontier in the figure above. Production point represents an production point.

A) c; inefficient.
B) e; inefficient.
C) b; unattainable.
D) c; unattainable.

Question 61

The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 26th car?

A) 0.25 tons of grain
B) 4 tons of grain
C) 2 tons of grain
D) 0.5 tons of grain

Question 62

Joe's hot dog stand can produce hot dogs and hamburgers. The table gives Joe's production possibilities. The opportunity cost of _.

A) the 20th hot dog is 0 hamburgers
B) the first 20 hot dogs is 20 hamburgers
C) the 40th hamburger is 20 hot dog
D) 1 hamburger is 10 hot dogs

Question 63

If Sam is producing at a point on his production possibilities frontier, then he

A) can produce more of one good only by producing less of the other.
B) will be unable to gain from trade.
C) cannot produce any more of either good.
D) is not subject to scarcity.

Question 64

Opportunity cost is expressed in a production possibilities frontier (PPF) by a movement

A) from the region within the PPF to a point on the PPF.
B) from the region outside of the PPF to a point on the PPF.
C) from the region within the PPF to the region outside of the PPF.
D) along the PPF where to gain more of one good it is necessary to give some of another good.

Question 65

A choice is made. The value of the highest- valued alternative given up is the _ of the choice made.

A) accounting cost
B) total cost
C) monetary cost
D) opportunity cost

Question 66

The above table shows production points on Sweet- Tooth Land's production possibilities frontier. Which of the following is an example of a point that is inefficient?

A) 38 chocolate bars and 0 cans of cola
B) 0 chocolate bars and 100 cans of cola
C) 20 chocolate bars and 80 cans of cola
D) 32 chocolate bars and 40 cans of cola

Question 67

When operating on its PPF, a country can produce 2 tons of butter and 200 cars OR 3 tons of butter and 150 cars. The opportunity cost of 1 ton of butter is _ _ cars per ton of butter.

A) 200
B) 50
C) 0.75
D) 300

Question 68

Ted can study for his economics exam or go to a concert. He decides to study for his economics exam instead of going to the concert. The concert he will miss is Ted's of studying for the exam.

A) implicit cost
B) discretionary cost
C) explicit cost
D) opportunity cost

Question 69

The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 5th ton of grain?

A) 16 cars
B) 6 cars
C) 2 cars
D) 3 cars

Question 70

The above table shows production points on Sweet- Tooth Land's production possibilities frontier. Which of the following statements is TRUE?

A) Producing 20 chocolate bars and 80 cans of cola is attainable, but inefficient.
B) Producing 40 chocolate bars and 0 cans of cola is unattainable and inefficient.
C) Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.
D) Producing 30 chocolate bars and 38 cans of cola is only attainable with an increase in technology.

Question 71

Opportunity cost is best defined as

A) the highest- valued alternative that is forgone when choosing among various alternatives.
B) the amount of money lost by one individual in an exchange process so that another individual might gain.
C) a situation in which one individual cannot have an absolute advantage over another individual in the production of all goods.
D) the amount of money that an individual is willing to pay to purchase a good that means a great deal to that person.

Question 72

The table above lists six points on the production possibilities frontier for grain and cars. From this information you can conclude that production is inefficient if this economy produces

A) 2 tons of grain and 27 cars.
B) 8 tons of grain and 10 cars.
C) 6 tons of grain and 18 cars.
D) 4 tons of grain and 26 cars.

Question 73

When we choose a particular option, we must give up alternative options. The highest- valued alternative forgone is the of the option chosen.

A) nonmonetary cost
B) opportunity cost
C) absolute advantage
D) comparative advantage

Question 74

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

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

Question 75

Most students attending college pay tuition and are unable to hold a full- time job. For these students, tuition is

A) part of the opportunity cost of going to college. So are their forgone earnings from not holding a full- time job.
B) not part of the opportunity cost of going to college. Neither are their forgone earnings from not holding a full- time job.
C) not part of the opportunity cost of going to college, but their forgone earnings from not holding a full- time job are part of the opportunity cost of attending college.
D) part of the opportunity cost of going to college. Their forgone earnings from not holding a full- time job are not part of the opportunity cost of attending college.

Question 76

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is
Than Fred's and her opportunity cost for changing tires is than Fred's.

A) greater; greater
B) less; greater
C) less; less
D) greater; less

Question 77

Opportunity cost is

A) the indirect cost.
B) the monetary cost.
C) the best choice that can be made.
D) the highest- valued alternative forgone.

Question 78

While producing on the production possibilities frontier, if additional units of a good could be produced at a constant opportunity cost, the production possibilities frontier would be

A) a straight line.
B) positively sloped.
C) bowed outward.
D) bowed inward.

Question 79

On a diagram of a production possibilities frontier, opportunity cost is represented by

A) a point on the vertical axis.
B) the slope of the production possibilities frontier, which indicates that to get more of one good requires less of another.
C) a ray through the origin.
D) a point on the horizontal axis.

Question 80

The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

A) 2 tons of grain and 27 cars
B) 6 tons of grain and 18 cars
C) 4 tons of grain and 26 cars
D) 7 tons of grain and 10 cars