- 1. Which of the following is "not" illustrated
by a production possibility boundary?
- A. scarcity
- B. opportunity cost
- C. necessity for choice
- D. allocative efficiency
- E. all of the above are illustrated
Use the table below to answer question
number 2
"Guns" |
0 |
100 |
200 |
300 |
400 |
500 |
"Bread" |
1000 |
900 |
750 |
550 |
300 |
0 |
- 2. Consider the above production possibilities table. The
table shows the maximum combinations of bread and guns
that can be produced when all resources are fully
employed. We can conclude that:
- A. the opportunity cost of producing 200 guns instead of
100 guns is 750 units of bread.
- B. the opportunity cost of producing 500 guns instead of
300 guns is zero since we don't have to give up any
bread.
- C. the opportunity cost of producing 400 guns instead of
100 guns is 600 units of bread.
- D. the opportunity cost of producing 300 units of bread
instead of 750 units of bread is 400 guns.
- E. none of the above.
- 3. Which of the following changes will have no effect on
the production possibility boundary?
- A. the development of a new and superior fertilizer.
- B. an increase in unemployment.
- C. the development of a more productive method of steel
production.
- D. growth in the labor force.
- E. all of the above affect the production possibility
boundary.
- 4. All of the following would tend to increase a nations
production possibilities EXCEPT:
- A. the society becomes more accepting of women who work.
- B. a new hybrid for wheat is discovered.
- C. a government program is instituted that encourages
college education.
- D. the nation decides (by whatever method) to increase
production of investment goods and decrease production of
consumption goods.
- E. all of the above would tend to expand a nations
production possibilities.
- 5. Production possibility frontiers are thought to be
concave from the origin (bowed out) because:
- A. of the different intensities with which commodities
and services are used in producing capital, land, and
labor.
- B. land, labor, and capital are used in fixed proportions
in producing all commodities and services.
- C. of the different intensities of people's labor
efforts.
- D. all productive resources are equally suited for
producing all goods.
- E. productive resources differ in their suitability for
producing different goods.
- 6. Which of the following would tend to increase U.S.
production possibilities in the future?
- A. the U.S. enters World War II.
- B. a new hybrid for wheat is discovered.
- C. a government program is instituted that encourages
college education.
- D. the present wage differential between Mexico and the
U.S. slowly erodes over time.
- E. none of the above will increase U.S. production
possibilities in the future.
Use the graph below to answer question
number 7
- 7. At the beginning of world war II, the U.S. moved from
the interior of their production possibility frontier to
the boundary. In the graph above, this is represented by
a move from point A to point B. What is the opportunity
cost to the U.S. of making that decision?
- A. since no consumption goods are sacrificed by moving
from point A to B, the opportunity cost is zero.
- B. while the opportunity cost is positive, it is
impossible to show it exactly on the graph.
- C. since the U.S. could have moved to point C rather than
point B, the opportunity cost of moving to point B is the
loss in potential consumption equal to the horizontal
distance C1 - C2.
- D. while it does not include the loss of any consumption
goods, the opportunity cost does include the loss of
american lives and property that occurred during the war.
- E. none of the above.
- 8. Suppose you need to study six hours per week to earn a
C, nine hours per week to earn a B, and 15 hours per week
to earn an A. This implies:
- A. increasing returns to hours studied.
- B. decreasing returns to hours studied.
- C. constant returns to hours studied.
- D. that extra study is a waste of time.
- 9. The "vicious circle of poverty" faced by
many third world countries refers to the fact that:
- A. most third world countries are ruled by totalitarian
or marxist governments that are unable or unwilling to
produce efficiently which leads to a vicious circle of
poverty for their citizens.
- B. most third world countries are ruled by totalitarian
or marxist governments that choose to produce consumption
goods for the ruling class while leaving most of the
population in poverty.
- C. most third world countries have very little resources
but large populations and must produce mainly consumption
goods just to feed their population at a subsistence
level.
- D. most third world countries are unable to borrow a
sufficient amount of money from developed countries to
allow investment in capital goods.
- E. none of the above.
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