Economics for Today, 8th Edition solutions manual and test bank by Irvin B. Tucker

Economics for Today, 8th Edition solutions manual and test bank by Irvin B. Tucker 

Chapter 2—Production Possibilities, Opportunity Cost, and Economic Growth

MULTIPLE CHOICE

1. Which of the following is not one of the three fundamental economic questions?

a.	What happens when you add to or subtract from a current situation?
b.	For whom to produce?
c.	How to produce?
d.	What to produce?

ANS: A PTS: 1 DIF: Easy

NAT: BUSPROG: Reflective Thinking STA: DISC: Productivity and growth

TOP: Three Fundamental Economic Questions KEY: Bloom's: Knowledge

2. Which of the following correctly lists the three fundamental economic questions?

a.	If to produce? Why to produce? When to produce?
b.	If to produce? What to produce? How to produce?
c.	Why to produce? What to produce? How to produce?
d.	What to produce? How to produce? For whom to produce?

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: Three Fundamental Economic Questions

KEY: Bloom's: Comprehension

3. Three basic decisions must be made by all economies. What are they?

a.	How much will be produced, when it will be produced, and how much it will cost.
b.	What the price of each good will be, who will produce each good, and who will consume each good.
c.	What will be produced, how goods will be produced, and for whom goods will be produced.
d.	How the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply.

ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: Three Fundamental Economic Questions

KEY: Bloom's: Comprehension

4. Because of the problem of scarcity, each economic system must make which of the following choices?

a.	How to produce?	c.	For whom to produce?
b.	What to produce?	d.	All of these.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: Three Fundamental Economic Questions

KEY: Bloom's: Comprehension

5. Which fundamental economic question is most closely related to the issues of income distribution and poverty?

a.	The What to Produce question.	c.	The How to Produce question.
b.	The Why to Produce question.	d.	The For Whom to Produce question.

ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: Three Fundamental Economic Questions

KEY: Bloom's: Comprehension

6. Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

a.	The What to Produce question.	c.	The How to Produce question.
b.	The Why to Produce question.	d.	The For Whom to Produce question.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: Three Fundamental Economic Questions

KEY: Bloom's: Comprehension

7. Opportunity cost:

a.	represents the best alternative sacrificed for a chosen alternative.
b.	has no relationship to the various alternatives that must be given up when a choice is made in the context of scarcity.
c.	represents the worst alternative sacrificed for a chosen alternative.
d.	Represents all possible alternatives sacrificed for a chosen alternative.

ANS: A PTS: 1 DIF: Easy

NAT: BUSPROG: Reflective Thinking STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Opportunity Cost KEY: Bloom's: Knowledge

8. The opportunity cost of an action is:

a.	the monetary payment the action required.
b.	the total time spent by all parties in carrying out the action.
c.	the value of the best opportunity that must be sacrificed in order to take the action.
d.	the cost of all alternative actions that could have been taken, added together.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

9. The highest valued alternative that must be given up in order to choose an option is called the:

a.	opportunity cost.	c.	scarcity expense.
b.	utility cost.	d.	disutility option.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Knowledge

10. Which of the following sayings best reflects the concept of opportunity cost?

a.	"You can't teach an old dog new tricks."
b.	"There is no such thing as a free lunch."
c.	"I have a baker's dozen."
d.	"There's no business like show business."

ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

11. The opportunity cost to a city for using local tax revenues to construct a new park is the:

a.	best alternative foregone by building the park.
b.	dollar cost of constructing the new park.
c.	dollar cost of the old park.
d.	increased taxes necessary to pay for maintenance of the new park.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

12. A good or service that is forgone by choosing one alternative over another is called a(n):

a.	explicit cost.	c.	historical cost.
b.	opportunity cost.	d.	accounting cost.

ANS: B PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Knowledge

13. Opportunity cost is the:

a.	cost incurred when one fails to take advantage of an opportunity.
b.	price paid for goods and services.
c.	cost of the best option forgone as a result of choosing an alternative option.
d.	undesirable aspects of an option.

ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

14. The opportunity cost of a purchase is:

a.	the selling price of the good or service.
b.	zero if the good or service satisfies a need.
c.	greater for persons who are rich.
d.	the good or service given up for the good or service purchased.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

15. The opportunity cost of watching television is:

a.	all of the alternative programs that appear on other stations.
b.	zero because there is no money expenditure involved.
c.	the alternative use of the time foregone by watching the program.
d.	zero if it benefits you.

ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

16. Which of the following does not illustrate opportunity cost?

a.	If I study, I must give up going to the football game.
b.	If I buy a computer, I must do without a 35" television.
c.	More consumer spending now means more spending in the future.
d.	If I spend more on clothes, I must spend less on food.

ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

17. Which of the following does not illustrate opportunity cost?

a.	If I study, I must give up going to the football game.
b.	If I buy a computer, I must do without a 35" television.
c.	If I spend more on clothes, I must spend less on food.
d.	All of these illustrate opportunity cost.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

18. The opportunity cost of an economic decision is:

a.	the best alternative that was sacrificed.
b.	the amount of money needed to implement the decision.
c.	any land, labor, and capital that are wasted.
d.	all options that were lost due to scarcity.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

19. Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

a.	The amount he spent, $10.
b.	Nothing, since he got his preferred choice.
c.	The Batman T-shirt.
d.	The X-Men T-shirt.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

20. On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:

a.	distance to the curve from the vertical axis.
b.	distance to the curve from the horizontal axis.
c.	movement along the curve.
d.	all of these.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

21. Which of the following statements is true?

a.	An opportunity cost is what must be given up in order to get something else.
b.	The three fundamental economic questions refer to What to produce? How to produce? and When to produce?
c.	The term "investment" refers to the purchase of stocks and bonds and other financial securities.
d.	The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

22. The amount of a good that must be given up to produce another good is the concept of:

a.	scarcity.
b.	specialization.
c.	trade.
d.	efficiency.
e.	opportunity cost.

ANS: E PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Knowledge

23. The opportunity cost of an activity means the:

a.	amount of money the activity costs.
b.	number of hours that is required to engage in this activity.
c.	expected gains by engaging in the activity.
d.	amount of other things that must be sacrificed in order to engage in the activity.
e.	expected gains minus the expected costs of engaging in the activity.

ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

24. In the context of the production possibilities curve, opportunity cost is measured in:

a.	dollars paid for the goods.
b.	the quantity of other goods given up.
c.	the value of the resources used.
d.	changing technology.
e.	units of satisfaction.

ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

25. Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

a.	five hours she worked.
b.	$75 she earned.
c.	10 points she lost on her exam.
d.	time she could have spent watching television.
e.	guilt she feels about neglecting her economics studies.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

26. When the opportunity cost of producing carrots increases as more carrots are produced, then:

a.	no more carrots will be produced.
b.	resources are equally suited to the production of carrots and to other goods.
c.	the production possibilities curve is a straight line.
d.	the production possibilities curve becomes positively sloped.
e.	the law of increasing costs is present.

ANS: E PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: The Law of Increasing Opportunity Costs KEY: Bloom's: Analysis

27. The opportunity cost of your college education is:

a.	c and d.
b.	d and e.
c.	the actual dollar cost of your college education.
d.	your best alternative use of the money you spend for a college education.
e.	money you could have earned working instead of going to college.

ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Comprehension

28. The law of increasing costs indicates that the opportunity cost of producing a good:

a.	is proportional to the production of the good.
b.	is constant to the production of the good.
c.	increases as more of the good is produced.
d.	decreases as more of the good is produced.
e.	increases as less of the good is produced.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: The Law of Increasing Opportunity Costs KEY: Bloom's: Comprehension

29. The amount of a good that is given up to produce another good is:

a.	its dollar cost.
b.	its opportunity cost.
c.	its relative cost.
d.	its absolute cost.
e.	all of these.

ANS: B PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Knowledge

Exhibit 2-1 Production possibilities curve data

Consumption Goods	Capital Goods
10	0
9	1
7	2
4	3
0	4

30. In Exhibit 2-1, according to the information, the opportunity cost of producing 3 units of capital is:

a.	3 units of consumption goods.	c.	6 units of consumption goods.
b.	4 units of consumption goods.	d.	7 units of consumption goods.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

31. In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:

a.	0.
b.	1 unit of consumption goods.
c.	2 units of consumption goods.
d.	4 units of consumption goods.
e.	there is not enough information to estimate the opportunity cost.

ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

Exhibit 2-2 Production possibilities curve

32. The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

a.	increasing.
b.	decreasing.
c.	zero.
d.	constant.
e.	indeterminate.

ANS: D PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

33. In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:

a.	coffee is constant.
b.	coffee is increasing.
c.	coffee is decreasing.
d.	corn is increasing.
e.	corn is decreasing,

ANS: A PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

34. In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

a.	2 million bushels of corn.
b.	6 million bushels of corn.
c.	8 million bushels of corn.
d.	14 million bushels of corn.
e.	it is not possible to determine.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

35. In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

a.	the same as moving from A to C.
b.	the same as moving from A to D.
c.	the same as moving from B to D.
d.	the same as moving from B to C.
e.	it is not possible to determine.

ANS: D PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Scarcity, tradeoffs, and opportunity cost TOP: Opportunity Cost

KEY: Bloom's: Analysis

36. A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

a.	$12.50 per pound.	c.	$80 per pound.
b.	$20 per pound.	d.	$100 per pound.

ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

37. Which word best completes the following sentence? A rational decision maker always chooses the option for which marginal benefit is __________ marginal cost.

a.	less than
b.	equal to
c.	unrelated to
d.	more than

ANS: D PTS: 1 DIF: Easy

NAT: BUSPROG: Reflective Thinking STA: DISC: Marginal costs & benefits

TOP: Marginal Analysis KEY: Bloom's: Knowledge

38. In economics, the term marginal refers to:

a.	the change or difference from a current situation.
b.	man-made resources as opposed to natural resources.
c.	the satisfaction a consumer receives from a good.
d.	holding everything else constant in the analysis.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Knowledge

39. When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:

a.	benefits expected from two cars with the cost of both.
b.	additional benefits expected from a second car with the cost of the two cars.
c.	dollar cost of the two cars with the potential income that the cars will generate.
d.	additional benefits of the second car with the additional cost of the second car.

ANS: D PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Analysis

40. While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be:

a.	zero.	c.	80 cents.
b.	50 cents.	d.	$1.

ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

41. While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries:

a.	would be zero.
b.	would be 25 cents.
c.	would be 50 cents.
d.	cannot be determined because the information about the price of the French fries is not provided.

ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

42. While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of:

a.	marginal analysis.
b.	basing decisions on total, rather than marginal, value.
c.	an unintended consequence.
d.	the fallacy of composition.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

43. Just before class, Jim tells Stuart, "Stuart, you shouldn't skip class today because you have paid tuition to enroll in the class." Stuart ignores Jim's advice, and instead makes the decision of whether to attend based on the importance to his grade that he feels he'd be missing that day in class relative to his value of the extra time he could have to finish the video game he is playing. To an economist, Stuart is:

a.	using marginal analysis.
b.	ignoring the total value of attending class.
c.	ignoring the concept of opportunity cost.
d.	irresponsible.

ANS: A PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Analysis

44. Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is:

a.	zero.	c.	$1.
b.	50 cents.	d.	$1.50.

ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

45. Ralph wants to buy some milk and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Ralph, the marginal cost of the third quart of milk is:

a.	zero.	c.	75 cents.
b.	25 cents.	d.	$1.

ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

46. A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

a.	Her marginal value of a serving of brunch has fallen below $12.
b.	Her marginal value of a serving has fallen below $2.36 ($12 divided by 5 servings).
c.	Her marginal value of food has fallen to zero.
d.	The total value she places on brunch today exactly equals $12.

ANS: C PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Application

47. According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:

a.	is positive.
b.	outweighs the extra cost.
c.	exceeds the benefits of the previous hour of study.
d.	will raise your exam score.

ANS: B PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Marginal costs & benefits TOP: Marginal Analysis

KEY: Bloom's: Comprehension

48. The principle that the opportunity cost increases as the production of one output expands along the production possibilities curve is the:

a.	law of increasing opportunity costs.
b.	law of supply.
c.	law of demand.
d.	law of diminishing returns.

ANS: A PTS: 1 DIF: Easy

NAT: BUSPROG: Reflective Thinking STA: DISC: Productivity and growth

TOP: The Law of Increasing Opportunity Costs KEY: Bloom's: Knowledge

49. If an economy is operating at a point inside the production possibilities curve,

a.	its resources are not being used efficiently.
b.	the curve will begin to shift inward.
c.	the curve will begin to shift outward.
d.	This is a trick question because an economy cannot produce at a point inside the curve.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

50. Which of the following most accurately indicates the implications of an economy's production possibilities curve?

a.	If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
b.	If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods.
c.	Over time, it is generally impossible for a country to expand its production of goods.
d.	An economy will automatically move toward a point that lies outside of the production possibilities constraint unless proper government policy constrains production.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

51. Which of the following is true of the production possibilities curve?

a.	It assumes a fixed level of technology.
b.	It assumes resources are fixed.
c.	It assumes resources are fully employed.
d.	All of these are correct.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

52. After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:

a.	we will have to give up the production of other goods that could have been produced with these resources.
b.	we will be able to produce the same amount of other goods as before.
c.	the military spending will result in an outward shift in the production possibilities curve but that the relief effort will result in an offsetting inward shift.
d.	we will be unable to devote the resources necessary toward these efforts unless there is an improvement in technology.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

53. A point outside the production possibilities curve represents a combination of goods that is:

a.	inefficient.	c.	unattainable.
b.	efficient.	d.	attainable.

ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

54. Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

a.	an increase in the labor force
b.	an increase in unemployment
c.	development of an improved technological method of production
d.	a decrease in the stock of physical capital

ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

55. In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

a.	The production possibilities curves for these countries would have shifted outward.
b.	The production possibilities curves for these countries would have shifted inward.
c.	The production possibilities curves for these countries would have been unaffected.
d.	This would have been illustrated by a movement along the production possibilities curves for these countries, but it would not have shifted them.

ANS: B PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

56. Which of the following would be least likely to cause the production possibilities curve to shift outward?

a.	a decreased desire for leisure by workers in the economy.
b.	an invention that requires fewer resources to produce a good.
c.	a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products.
d.	an expansion in the man-made productive resources available to the economy as the result of a high rate of investment.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

57. Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

a.	flattening of the curve.
b.	movement from one point to another point along the curve.
c.	outward shift of the curve.
d.	movement from a point on the curve to a point inside the curve.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

58. The production possibilities curve shows that:

a.	some of one good must be given up to get more of another good in an economy that is operating efficiently.
b.	no output combination is impossible.
c.	an economy that is operating efficiently can have more of one good without giving up some of another good.
d.	scarcity can be eliminated.

ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

59. Any point on the production possibilities curve illustrates:

a.	minimum production combinations.
b.	maximum production combinations.
c.	economic growth.
d.	a nonfeasible production combination.

ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

60. Production possibilities curve analysis includes the idea of:

a.	opportunity cost.	c.	maximum production choices.
b.	scarcity.	d.	all of these.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Knowledge

61. An efficient economy:

a.	uses available resources fully.
b.	uses the best division of labor.
c.	produces an output combination at some point along the production possibility curve.
d.	all of these.

ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

62. A production possibility graph slopes down because of:

a.	the law of increasing costs.
b.	nonhomogeneous resources.
c.	inefficiency.
d.	improper output mix.
e.	unemployment.

ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Analysis

63. The production possibility curve is bowed outward from the origin because of:

a.	the law of increasing opportunity costs.
b.	the finite nature of the resource base.
c.	inefficiency.
d.	improper output mix.
e.	unemployment.

ANS: A PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Analysis

64. The production possibilities curve demonstrates the basic economic principle that:

a.	market-based economies are more efficient.
b.	supply will determine demand in the economy.
c.	the production of more capital goods this year will cause the economy to produce less consumption goods next year.
d.	to produce more of any one thing, assuming full employment, the economy must produce less of something else.
e.	to produce more consumption goods this year requires the production of more capital goods this year.

ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

65. A production possibilities curve shows the various:

a.	prices that can be charged for capital and consumption goods.
b.	combinations of prices and outputs that can be produced.
c.	combinations of goods the economy has the capacity to produce.
d.	combinations of resources and prices that the economy can produce.

ANS: C PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Analysis

66. A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the:

a.	distance to the curve from the horizontal axis.
b.	distance to the curve from the vertical axis.
c.	distance from the origin to the curve.
d.	change in Y for each change in X along the curve.

ANS: D PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Analysis

67. Of factors which affect any economy's production potential, the best two listed below are:

a.	resources and technology.
b.	prices and outputs.
c.	wages and prices.
d.	taxes and prices.
e.	resources and prices.

ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

68. The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called:

a.	scarcity.
b.	opportunity cost.
c.	unlimited production.
d.	capital accumulation.
e.	production possibilities.

ANS: E PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension

69. A production possibilities curve shows the:

a.	dollar costs of producing two different goods.
b.	amounts of labor and capital needed to produce one good.
c.	various combinations of goods that can be produced.
d.	prices of different goods that are produced in an economy.
e.	inefficient use of available resources and technology.

ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

STA: DISC: Productivity and growth TOP: The Production Possibilities Curve

KEY: Bloom's: Comprehension