Description
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.
