Question 1

Which of the following describes the vicious circle of poverty?

Accepted Answer

A)   Because resources are limited, all economies eventually become poor.
B)   In the long run, economies cycle between being rich and being poor.
C)   For an economy to grow requires more consumption goods, which requires less capital goods, which means it will eventually become poor.
D)   Due to excessive consumption, rich economies will destroy their resource base and eventually become poor.
E)   Poor economies are poor because they do not produce sufficient capital goods, and without the production of sufficient capital goods, they remain poor.F) None of the above
G) A) and B)

Question 2

Land includes all of the following except

Accepted Answer

A)   a virgin forest
B)   natural-state real estate
C)   oil under the oceans
D)   deposits of copper
E)   an irrigation systemF) D) and E)
G) B) and C)

Question 3

Human capital can be increased by more

Accepted Answer

A)   robots aiding workers
B)   machinery produced with combinations of labor and capital
C)   workers' education and experience
D)   factories built to accommodate workers
E)   oil discovered that can be used to power the capital that workers useF) None of the above
G) C) and D)

Question 4

Any point inside a production possibilities curve indicates that the economy is using all its available resources and technology.

Accepted Answer

A) True 
 B)False

Question 5

The production possibilities curve shows the different combinations of goods that can be produced with a set of given resources.

Accepted Answer

A) True 
 B)False

Question 6

Capital is a good used in the production of goods that households consume.

Accepted Answer

A) True 
 B)False

Question 7

The opportunity cost of your college education is

Accepted Answer

A)   the cost of the textbooks you buy at the bookstore
B)   the grades you receive in your courses
C)   the actual dollar cost of your college education
D)   your best alternative use of the money you spend for a college education
E)   the income you earn while going to collegeF) A) and B)
G) C) and E)

Question 8

What is the usual shape of the production possibilities curve?

Accepted Answer

A)   upward-sloping
B)   bowed-out from the origin
C)   bowed-in from the origin
D)   a straight-line, downward-sloping curve
E)   U-shapedF) B) and C)
G) A) and E)

Question 9

-In Exhibit B-17, which of the following is true about specialization?

Accepted Answer

A)   The United States will specialize in the production of oil.
B)   The United States will specialize in the production of computers.
C)   Mexico will specialize in the production of oil and computers.
D)   Mexico will specialize in computers and the United States will specialize in oil.
E)   Mexico will specialize in the production of computers.F) A) and E)
G) A) and D)

Question 10

When technological progress occurs, the production possibilities curve

Accepted Answer

A)   shifts inwards to the left
B)   becomes flatter in one end and steeper at the other end
C)   becomes steeper
D)   shifts outwards to the right
E)   does not changeF) A) and C)
G) A) and D)

Question 11

-In Exhibit B-17, the opportunity cost of producing one million computers in the UnitedStates and in Mexico is

Accepted Answer

A)   100 and 80 million barrels of oil, respectively
B)   10 and 8 million barrels of oil, respectively
C)   10 and 80 million barrels of oil, respectively
D)   10 and 80 million computers, respectively
E)   1 and 80 million barrels of oil, respectivelyF) A) and E)
G) A) and D)

Question 12

The quantity of one good that is given up to produce another is defined to be its

Accepted Answer

A)   market value
B)   opportunity cost
C)   relative cost
D)   absolute cost
E)   nominal costF) C) and E)
G) B) and E)

Question 13

-In Exhibit B-17, if these countries decide to trade, which of the following is true?

Accepted Answer

A)   The United States will specialize in the production of oil.
B)   The United States will produce both goods.
C)   Mexico will specialize in the production of oil and computers.
D)   Mexico will specialize in computers and the United States will specialize in oil.
E)   Mexico will specialize in the production of oil.F) A) and D)
G) B) and D)

Question 14

A country should always specialize in the production of any product for which it holds an absolute advantage.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product.
 
-In Exhibit B-1 Barbootland has an absolute advantage in the production of kiwi fruit.

Accepted Answer

A) True 
 B)False

Question 16

-In Exhibit B-13 (on the previous page) , which of the following statements is true?

Accepted Answer

A)   France has an absolute advantage in eggs.
B)   France has a more efficient economy.
C)   The United States has a more efficient economy.
D)   The United States has a comparative advantage in eggs.
E)   Both countries have a comparative advantage in eggs and cheese.F) A) and E)
G) None of the above

Question 17

If a resource is unemployed, it

Accepted Answer

A)   is also underemployed
B)   is utilized, but not in its most productive employment
C)   is not utilized
D)   is not counted as a resource for the economy
E)   must be a labor resourceF) A) and C)
G) None of the above

Question 18

-Exhibit B-7 shows the production possibilities curves for a country for the years 2003and 2004. Suppose the country was located at point A in 2003 and point B in 2004. This economy

Accepted Answer

A)   experienced a loss of resources in 2004
B)   had lower unemployment in 2004 than in 2003
C)   achieved full employment in 2003 and in 2004
D)   is less efficient in 2004 than in 2003
E)   produced fewer goods in 2004 than in 2003F) A) and B)
G) A) and C)

Question 19

Economic efficiency is defined in the text as

Accepted Answer

A)   the maximum production of consumption goods
B)   the maximum production of capital goods
C)   a balanced production of consumption and capital goods
D)   a maximum set of resources
E)   the absence of underemployment or unemploymentF) A) and B)
G) A) and C)

Question 20

Which of the following is an example of a capital good?

Accepted Answer

A)   an artificial Christmas tree used by a family year after year
B)   a sweater worn by a sixth grade student
C)   electricity used by a household to heat a swimming pool
D)   a pencil used by a shopper making out a grocery list
E)   a shovel used by a construction workerF) A) and D)
G) C) and E)

Exam 2: Production Possibilities and Opportunity Costs

Any point inside a production possibilities curve indicates that the economy is using all its available resources and technology.

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-In Exhibit B-17, if these countries decide to trade, which of the following is true?

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The opportunity cost of your college education is

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-Exhibit B-7 shows the production possibilities curves for a country for the years 2003and 2004. Suppose the country was located at point A in 2003 and point B in 2004. This economy

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-In Exhibit B-17, the opportunity cost of producing one million computers in the UnitedStates and in Mexico is

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Economic efficiency is defined in the text as

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If a resource is unemployed, it

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Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product. -In Exhibit B-1 Barbootland has an absolute advantage in the production of kiwi fruit.

Correct AnswerverifiedShow Answer

A country should always specialize in the production of any product for which it holds an absolute advantage.

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The production possibilities curve shows the different combinations of goods that can be produced with a set of given resources.

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-In Exhibit B-13 (on the previous page) , which of the following statements is true?

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-In Exhibit B-17, which of the following is true about specialization?

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Land includes all of the following except

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When technological progress occurs, the production possibilities curve

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Capital is a good used in the production of goods that households consume.

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The quantity of one good that is given up to produce another is defined to be its

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Which of the following is an example of a capital good?

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Which of the following describes the vicious circle of poverty?

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What is the usual shape of the production possibilities curve?

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Human capital can be increased by more

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