Deck 1: First Principles

Question 1

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good:
A.is constant.
B.is measured in dollar terms.
C.is measured by the amount of the other good that must be given up.
D.usually decreases.

Answer 1

is measured by the amount of the other good that must be given up.

Question 2

(Figure: Guns and Butter) Look at the figure Guns and Butter.This production possibility frontier is:
A.bowed out from the origin because of increasing opportunity
B.costs.bowed in toward the origin because of increasing
C.opportunity costs.bowed in toward the origin because of
D.constant costs of guns and butter.linear because of constant costs.

Answer 2

bowed out from the origin because of increasing opportunity

Question 3

A simplified representation that is used to study a real situation is called:

A)a model.
B)a production possibility frontier.
C)an assumption.
D)a trade-off.

Answer 3

A

Question 4

The models used in economics:
A.are usually limited to variables that are directly related.
B.are essentially not reliable because they are not testable in the real world.
C.are of necessity unrealistic and not related to the real world.
D.emphasize basic relationships by abstracting from complexities in the everyday world.

Question 5

(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

Question 6

(Figure: Guns and Butter) Look at the figure Guns and Butter.If the economy were operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce 18 pounds of butter:
A.indicates you can have more butter and guns simultaneously.
B.makes it clear that this economy experiences decreasing opportunity costs.
C.involves a loss of 8 guns per period.
D.involves a loss of 4 guns per period.

Question 7

Economic models are:
A.created and used to duplicate reality.
B.useless if they are simple.
C.made generally of wood, plastic, and/or metal.
D.often useful in forming economic policy.

Question 8

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is units of consumer goods per period.
A.0
B.6
C.8
D.14

Question 9

(Table: Production Possibilities Schedule II) Look at the figure Production Possibilities Schedule II.The production of 14 units of consumer goods and 1 unit of capital goods per period would:
A.result in full employment.result in no unused resources.
B.result in some unused or inefficiently used resources.
C.increase economic growth.

Question 10

(Figure: Guns and Butter) Look at the figure Guns and Butter.Suppose the economy produced
8 guns and 12 pounds of butter per period.
A.This is a possible choice but is inefficient.
B.The notion of increasing opportunity cost is invalidated.
C.The economy is still efficient but has made a decision not to buy as much as it could.
D.Something must be done to reduce the amount of employment.

Question 11

Figure: Guns and Butter
(Figure: Guns and Butter) Look at the figure Guns and Butter.The combination of guns and butter at point H:
A.can be attained but would cost too much.
B.cannot be attained, given the level of technology and the factors of production available.
C.has no meaning, since it does not relate to the preferences of
D.consumers.is attainable but would increase unemployment.

Question 12

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:
A.a zero slope.
B.a constant, negative slope.
C.an increasing, negative slope.
D.a decreasing, negative slope.

Question 13

(Figure: Guns and Butter) Look at the figure Guns and Butter.On this figure, points A, B, E, and
F:
A.indicate combinations of guns and butter that society can produce using all of its factors efficiently.
B.show that the opportunity cost of more guns increases but that of more butter decreases.
C.indicate that society wants butter more than it wants guns.
D.indicate constant costs for guns and increasing costs for butter.

Question 14

The production possibility frontier illustrates that:

A)the economy will automatically end up at full employment.
B)an economy's productive capacity increases proportionally with its population.
C)if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
D)economic production possibilities have no limit.

Question 15

The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of:
A.increasing opportunity cost.
B.decreasing opportunity cost.
C.constant opportunity cost.
D.concave opportunity cost.

Question 16

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.

Question 17

The models that economists construct:

A)usually make simplifying assumptions.
B)often rely on physical constructs, such as those used by architects.
C)rarely use mathematical equations or graphs.
D)attempt to replicate the real world.

Question 18

The importance of an economic model is that it allows us to:

A)build a complex and accurate model of the economy.
B)build an accurate mathematical model of the economy.
C)focus on the effects of only one change at a time.
D)avoid opportunity costs.

Question 19

When building a model, economists:

A)simplify reality in order to highlight what really matters.
B)attempt to duplicate reality in all of its complexity.
C)ignore the facts and instead try to determine what the facts should
D)be.are careful to avoid the scientific method.

Question 20

A production possibility frontier that is a straight line sloping down from left to right would suggest that:

A)more of both goods could be produced moving along the
B)frontier.the two products must have the same price.
C)the opportunity costs of the products are constant.
D)there are no opportunity costs.

Question 21

Figure: Consumer and Capital Goods
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods.The movement from curve 1 to curve 2 indicates:
A.economic growth.
B.a change from unemployment to full employment.
C.a decrease in the level of technology.
D.instability.

Question 22

Suppose the state of Oklahoma decides to produce only two goods, oil and football helmets.According to the production possibility frontier, as oil production increases, the production of football helmets will:
A.increase.
B.not change.
C.decrease at a decreasing rate.
D.decrease.

Question 23

All points on the production possibility frontier are:
A.efficient production points.
B.inefficient production points.
C.infeasible production points.
D.economic growth.

Question 24

Figure: Production Possibility Frontier Curve for Tealand
(Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand.In the figure, Tealand can produce at point E only if the government:
A.eliminates unemployment.
B.raises taxes.
C.permits more immigration.
D.increases the cost of production by decreasing the use of technology.

Question 25

Figure: Consumer and Capital Goods
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods.Point
Z:
A.is unattainable, all other things unchanged.
B.is attainable if the economy is able to reach full employment.
C.is attainable if the quantity and/or quality of factors decreases.
D.will be attained as soon as the economy becomes efficient and moves to curve 2.

Question 26

Figure: Production Possibility Frontier Curve for Tealand
(Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand.In the figure, if Tealand is producing 10 million scones and 10 million cups of tea (point A), we know that the economy:
A.is using its resources efficiently.
B.is using its resources inefficiently.
C.is fully employing its resources.
D.has found new resources.

Question 27

If an economy is producing a level of output that is on its production possibility frontier, the economy has:
A.idle resources.
B.idle resources but is using resources efficiently.
C.no idle resources but is using resources inefficiently.
D.no idle resources and is using resources efficiently.

Question 28

The opportunity cost of production:
A.is the price of a good.
B.is what you give up to produce the good.
C.decreases as production increases.
D.is what you gain by producing the good.

Question 29

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.

Question 30

All points outside the production possibility frontier are:

A)efficient production points.
B)inefficient production points.
C)infeasible production points.
D)economic growth.

Question 31

Figure: Production Possibility Frontier Curve for Tealand
(Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand.In the figure, Tealand is producing at point C on its production possibility frontier.What is the opportunity cost in Tealand of increasing the production of tea from 20
million cups to 30 million cups?
A.10 million cups of tea
B.5 million scones
C.10 million scones
D.The answer is impossible to determine from the information given.

Question 32

One of the controversies surrounding America's energy markets is the trade-off between energy production and clean air.Assuming clean air has value, the United States will be on its production possibility frontier if and only if:
A.resources used to produce clean air and energy are not being fully utilized.
B.pollution is eliminated.
C.the price of energy is relatively low.
D.resources used to produce clean air and energy are being fully utilized.

Question 33

The production possibility frontier will shift outward for which of the following reasons?

A)a decrease in the labor force
B)an upgrade of capital to the best available technology
C)better technology that improves worker productivity
E)a decrease in the unemployment rate

Question 34

The economy's factors of production are not equally suitable for producing different types of goods.This principle generates:
A.economic growth.
B.technical efficiency.underuse of
C.resources.
D.the law of increasing opportunity cost.

Question 35

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.

Question 36

If Poland decides to increase the production of steel-and decrease the production of vodka-the bowed-out production possibility frontier would suggest that there will be
________ opportunity cost of producing more steel.
A.an increasing
B.a decreasing
C.a nonexistent
D.an unchanged

Question 37

All points inside the production possibility frontier represent:

A)efficient production points.
B)inefficient production points.
C)infeasible production
D)points.economic growth.

Question 38

If an economy is producing at a point on its production possibilities frontier:

A)it is efficient in production and allocation.
B)it is efficient in production but not necessarily in allocation.
C)it is efficient in allocation but not necessarily in
D)production.it is not necessarily efficient in production or allocation.

Question 39

(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines.As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine:
A.falls.
B.rises.
C.remains unchanged.

Question 40

Consider a production possibility frontier for Iraq.If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere of its production possibility frontier.
A.inside
B.outside
C.near the bottom near
D.the top

Question 41

The production possibility frontier will shift outward for all of the following reasons except:
A.an increase in the unemployment rate.
B.an increase in the labor force.
C.an improvement in technology.
D.an increase in worker productivity.

Question 42

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 would represent an inefficient combination of coconuts and
Fish for Tom to produce?

A)A only
B)A and B
C)C only
D)B and D

Question 43

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 an efficient combination of coconuts and fish that Tom could choose to produce?
A.A only
B.A and B
C.B and C
D.D only

Question 44

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.

Question 45

The effect of a tremendous natural disaster can be shown by:
A.a point inside of the production possibility frontier.
B.an outward shift of the production possibility frontier.
C.a movement from one point to another along the production possibility frontier.
D.an inward shift of the production possibility frontier.

Question 46

Figure: Tom's Production Possibilities
(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, the opportunity cost for Tom to move from point A on the curve to point B is:
A.10 coconuts.
B.10 fish.
C.5 coconuts.
D.5 fish.

Question 47

Figure: Tom's Production Possibilities
(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, the opportunity cost for Tom to move from point C on the curve to point A is:
A.10 coconuts.
B.30 fish.
C.5 coconuts.
D.There is no opportunity cost in terms of fish.

Question 48

Figure: Tom's Production Possibilities
(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, which of the point or points represents the combination of coconuts and fish feasible for Tom to produce at this time?
A.A only
B.A and B
C.A, B, and C
D.D only

Question 49

The production possibility frontier illustrates:
A.the maximum quantity of one good that can be produced given the quantity of the other good produced.
B.that when markets don't achieve efficiency, government intervention can improve society's welfare.
C.the inverse relation between price and quantity of a particular good.
D.that people usually exploit opportunities to make themselves better off.

Question 50

The illustrates the trade-offs facing an economy that produces only two goods.
A.production possibility frontier
B.circular-flow diagram
C.all else equal assumption
D.income distribution

Question 51

In terms of the production possibility frontier, inefficient use of available resources is shown by:

A)an increase in the labor force growth rate.
B)a movement from one point to another along the production possibility frontier.
C)an inward shift of the production possibility frontier due to the lack of opportunity.
D)a point inside the production possibility frontier.

Question 52

The effect of an increase in productive inputs such as labor and capital can be shown by:
A.a point inside of the production possibility frontier.
B.an outward shift of the production possibility frontier.
C.a movement from one point to another along the production possibility
D.frontier.an inward shift of the production possibility frontier.

Question 53

Figure: Wine and Wheat
(Figure: Wine and Wheat) Look at the figure Wine and Wheat.If this economy is producing 12 tons of wheat and 9,000 bottles of wine, we know the economy:
A.is using its resources efficiently.
B.is using its resources inefficiently.
C.is producing at an unattainable point.
D.has unemployment.

Question 54

Figure: Wine and Wheat
(Figure: Wine and Wheat) Look at the figure Wine and Wheat.If this economy is producing at point A, we know the economy is:
A.using its resources efficiently.
B.using its resources inefficiently.
C.producing at an unattainable point.
D.trading with another country.

Question 55

(Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time.A student sleeps 8 hours per day and divides the remaining time between study time and leisure time.The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day.Suppose the student completes a speed-reading course that allows him to do the same amount of studying in half as many hours.Which of the following is now true of his opportunity costs?
A.The opportunity cost of leisure has increased.
B.The opportunity cost of studying has increased.
C.The opportunity cost of leisure has decreased.
D.There is no change in the opportunity costs.

Question 56

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?

A)A only
B)A and B
C)B and C
D)D only

Question 57

An inward shift in the U.S.economy's production possibility frontier could represent which of the following?

A)U.S.workers moving to Canada
B)U.S.workers moving from New Jersey to Massachusetts
C)U.S.economic growth
D)U.S.economic growth as workers move to different states

Question 58

Figure: Tom's Production Possibilities
(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, the opportunity cost for Tom to move from point B on the curve to point A is:
A.10 coconuts.
B.10 fish.
C.5 coconuts.
D.5 fish.

Question 59

Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources.Which of the following best creates potential economic growth?
A.The unemployment rate in Indiana rises from 5% to 6%.
B.The Midwestern United States has a devastating drought.
C.The percentage of Indiana residents with a college degree rises from 25% to 30%.
D.The United States imports more and more low-cost steel from Asian countries.

Question 60

If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X:
A.is an increasing amount of good Y.
B.is a decreasing amount of good Y.
C.is equal to the inverse of the amount of good Y.
D.is a constant amount of good Y.

Question 61

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.If the economy is operating at point B, producing 16 cars and 12 computers per period, a decision to move to point E and produce 18 computers:
A.indicates you can have more computers and cars simultaneously.
B.makes it clear that this economy has decreasing opportunity costs.
C.involves a loss of 8 cars per period.
D.involves a loss of 4 cars per period.

Question 62

(Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule
I.If the economy produces 24 units of capital goods per period, it also can produce at most
________ units of consumer goods per period.
A.5
B.4
C.3
D.2

Question 63

Figure: Wine and Wheat
(Figure: Wine and Wheat) Look at the figure Wine and Wheat.If this economy is producing at point A and it wants to produce at point B, it needs to:
A.trade with another country.
B.increase its resources.
C.decrease production.
D.use its existing resources efficiently.

Question 64

The U.S.production possibility frontier will if there is a large influx of immigrants.
A.shift in
B.shift out
C.not change
D.cannot be determined from the information provided

Question 65

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.Points A, B, E, and F:
A.indicate combinations of cars and computers that society can produce using all of its resources efficiently.
B.show that the opportunity cost of more cars increases, but that of more computers decreases.
C.indicate that society wants computers more than cars.
D.indicate constant costs for cars and increasing costs for computers.

Question 66

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 producing at point D?
A.3 tons of wheat
B.6 tons of wheat
C.9 tons of wheat
D.15 tons of wheat

Question 67

The slope of a typical production possibility frontier is:

Question 68

In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day.Now Kessy has a larger oven and refrigerator.How does this affect his production possibility frontier?
A.It shifts out his production possibility frontier.
B.It shifts in his production possibility
C.frontier.He will not be efficient.
D.He will not be able to produce as much as before.

Question 69

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.The combination of cars and computers at point H:
A.can be attained but would cost too much.
B.cannot be attained given the level of technology and the resources available.
C.has no meaning, since it is not what consumers want.
D.is attainable but would increase unemployment.

Question 70

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.A
movement from producing 12 cars and 16 computers per period to point B means:
A.a loss of 4 computers and a gain of 4 cars per period.
B.a gain of 2 cars and a loss of 4 computers per period.
C.a gain of 4 cars and a loss of 6 computers per
D.period.a loss of 2 cars and a gain of 4 computers per period.

Question 71

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.Which of the following is not the maximum amounts of cars and computers this economy can produce?
A.18 cars and 0 computers per
B.period 0 cars and 20 computers
C.per period 16 cars and 12 computers
D.per period 0 cars and 18 computers per period

Question 72

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.If the economy is producing 8 cars and 12 computers per period:
A.this is an attainable choice but involves unemployment or inefficiency.
B.the notion of increasing opportunity cost is invalidated.
C.the economy is still efficient but has made a decision not to buy as much as it could.
D.something must be done to reduce the amount of employment.

Question 73

Figure: Production Possibility Frontier
(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.This production possibility frontier is:
A.bowed out from the origin because of increasing opportunity costs.
B.bowed in toward the origin because of increasing opportunity costs.
C.bowed in toward the origin because of constant cost of cars and
D.computers.linear because of constant costs.

Question 74

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of potatoes is ________
pound(s) of cabbage.
A.1/2
B.2
C.100
D.200

Question 75

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of cabbage is ________
pound(s) of potatoes.
A.1/2
B.2
C.100
D.200

Question 76

(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

Question 77

Figure: Wine and Wheat
(Figure: Wine and Wheat) Look at the figure Wine and Wheat.If this economy is producing on the production possibility frontier, what would allow it to produce at point C?
A.an improvement in technology
B.a decrease in resources
C.a decrease in production
D.the elimination of unemployment

Question 78

The U.S.production possibility frontier would if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers.

A)shift in
B)shift out
C)not change
D)cannot be determined from the information provided

Question 79

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

Question 80

(Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule
I.The opportunity cost of producing the third unit of consumer goods is units of
capital goods.
A.2
B.4
C.6
D.8