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In goods markets ________ and in factor markets ________.


A) households sell to firms; firms sell to households
B) firms sell to households; households sell to firms
C) households sell to firms; households sell to firms
D) firms sell to households; firms sell to households

E) C) and D)
F) B) and C)

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-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 -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

E) A) and C)
F) A) and D)

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-The above table shows production combinations on a country's production possibilities frontier. The opportunity cost of increasing the production of Y from 16 to 28 units is ________ units of good X per unit of good Y. A) 12 B) 6 C) 3 D) There is no opportunity cost when moving from one point to another along a production possibilities frontier so none of the above answers is correct. -The above table shows production combinations on a country's production possibilities frontier. The opportunity cost of increasing the production of Y from 16 to 28 units is ________ units of good X per unit of good Y.


A) 12
B) 6
C) 3
D) There is no opportunity cost when moving from one point to another along a production possibilities frontier so none of the above answers is correct.

E) A) and B)
F) C) and D)

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Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?


A) guitars
B) cellos
C) both goods
D) neither good

E) A) and D)
F) B) and C)

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Moving downward along a PPF, the opportunity cost of another unit of the good measured along the horizontal axis decreases.

A) True
B) False

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-The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one can of cola if Sweet-tooth Land moves from point C to point B? A) 20 chocolate bars per can of cola B) 10 chocolate bars per can of cola C) 2 chocolate bars per can of cola D) 1/2 chocolate bars per can of cola -The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one can of cola if Sweet-tooth Land moves from point C to point B?


A) 20 chocolate bars per can of cola
B) 10 chocolate bars per can of cola
C) 2 chocolate bars per can of cola
D) 1/2 chocolate bars per can of cola

E) A) and B)
F) None of the above

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A marginal cost curve


A) is upward sloping.
B) shows that as more of a good is produced, opportunity costs of producing another unit increase.
C) is bowed inward so that its slope can become negative.
D) Both answers A and B are correct.

E) A) and B)
F) A) and C)

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-A (very, very small) country produces milk and shirts and its production possibilities frontier is in the table above. The nation is currently producing at point B. What is the opportunity cost of two additional gallons of milk? At point C? At point D? What do your results show? -A (very, very small) country produces milk and shirts and its production possibilities frontier is in the table above. The nation is currently producing at point B. What is the opportunity cost of two additional gallons of milk? At point C? At point D? What do your results show?

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At point B, the opportunity cost of 2 ad...

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-As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat A) decreases. B) depends on the initial quantity produced. C) increases. D) remains the same. -As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat


A) decreases.
B) depends on the initial quantity produced.
C) increases.
D) remains the same.

E) B) and C)
F) A) and D)

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-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. If 3 million gallons of ice cream are produced, marginal cost ________ marginal benefit and ________ produced. A) exceeds; too much ice cream is B) is less than; too much ice cream is C) exceeds; not enough ice cream is D) is less than; not enough banking services are -Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. If 3 million gallons of ice cream are produced, marginal cost ________ marginal benefit and ________ produced.


A) exceeds; too much ice cream is
B) is less than; too much ice cream is
C) exceeds; not enough ice cream is
D) is less than; not enough banking services are

E) A) and D)
F) A) and C)

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-In the figure above, point A is undesirable because A) there is an inefficient use of resources. B) too much health care is being produced. C) the opportunity costs of health care is too high. D) point E is a more realistic option in this economy. -In the figure above, point A is undesirable because


A) there is an inefficient use of resources.
B) too much health care is being produced.
C) the opportunity costs of health care is too high.
D) point E is a more realistic option in this economy.

E) B) and D)
F) B) and C)

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-Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of X is A) 1 unit of Y per unit of X for Agnes and 2 units of Y per unit of X for Brenda. B) 1 unit of Y per unit of X for Agnes and 1/2 unit of Y per unit of X for Brenda. C) 1 hour for Agnes and 1/2 hour for Brenda. D) 1 hour for Agnes and 2 hours for Brenda. -Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of X is


A) 1 unit of Y per unit of X for Agnes and 2 units of Y per unit of X for Brenda.
B) 1 unit of Y per unit of X for Agnes and 1/2 unit of Y per unit of X for Brenda.
C) 1 hour for Agnes and 1/2 hour for Brenda.
D) 1 hour for Agnes and 2 hours for Brenda.

E) A) and B)
F) B) and D)

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A point inside a production possibilities frontier


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

E) A) and B)
F) A) and C)

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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) Production efficiency occurs when production is on the frontier itself.
D) Consumers will receive equal benefits from the two goods illustrated in the PPF.

E) All of the above
F) None of the above

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The nation's production possibilities frontier is bowed outward. Suppose that the government decides to increase the production of armaments by $20 billion, and that as a result the output of consumer goods falls by $20 billion. If a further $20 billion increase beyond the initial $20 billion increase in armaments output is sought, we can expect that the output of consumer goods and services will fall further by


A) less than $20 billion.
B) $20 billion.
C) more than $20 billion.
D) There is not enough information to determine the answer.

E) A) and C)
F) A) and B)

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-The above table shows production combinations on a country's production possibilities frontier. What is the opportunity cost of one unit of Y when the production of good Y increases from 16 to 28 units? A) 4 units of good X per unit of good Y B) 3 units of good X per unit of good Y C) 1/4 unit of good X per unit of good Y D) There is no opportunity cost when moving from one point to another along a production possibilities frontier. -The above table shows production combinations on a country's production possibilities frontier. What is the opportunity cost of one unit of Y when the production of good Y increases from 16 to 28 units?


A) 4 units of good X per unit of good Y
B) 3 units of good X per unit of good Y
C) 1/4 unit of good X per unit of good Y
D) There is no opportunity cost when moving from one point to another along a production possibilities frontier.

E) A) and B)
F) None of the above

Correct Answer

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A reduction in the amount of unemployment


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

E) C) and D)
F) B) and C)

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President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school. This policy would


A) increase human capital and increase economic growth.
B) increase physical capital and increase economic growth.
C) increase financial capital and increase economic growth.
D) eliminate opportunity costs and increase economic growth.

E) C) and D)
F) None of the above

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-The table above gives the production possibilities frontier for a nation that produces wheat and soybeans. Use the information in that table to complete the table below, which has in it the opportunity costs of moving from one production point to another. Do not forget to note the units of the opportunity costs. -The table above gives the production possibilities frontier for a nation that produces wheat and soybeans. Use the information in that table to complete the table below, which has in it the opportunity costs of moving from one production point to another. Do not forget to note the units of the opportunity costs. -The table above gives the production possibilities frontier for a nation that produces wheat and soybeans. Use the information in that table to complete the table below, which has in it the opportunity costs of moving from one production point to another. Do not forget to note the units of the opportunity costs.

Correct Answer

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blured image The table above gives the opp...

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Which of the following describes comparative advantage?


A) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.
B) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.
C) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
D) Jane can type 50 words per minute and Joe can type 60 words per minute.

E) B) and C)
F) C) and D)

Correct Answer

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