HW1 MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1 Production efficiency is achieved when A the ability is gained to produce goods and services that are desired beyond the PPF boundary B producing one more unit of one good cannot occur without producing less of some other good C producing inside the production possibilities frontier D all goods and services desired by consumers can be produced in the economy Answer B Hot dogs number per hour 60 40 20 0 and and and and Hamburgers number per hour 0 20 40 60 2 Joe s hot dog stand can produce hot dogs and hamburgers The table gives Joe s production possibilities The opportunity cost of A 1 hamburger is 10 hot dogs B the first 20 hot dogs is 20 hamburgers C the 20th hot dog is 0 hamburgers D the 40th hamburger is 20 hot dog Answer B 3 The opportunity cost of moving from point a to point b in the above figure is A 3 2 pairs of socks per sweater B 3 pairs of socks C 2 sweaters D zero Answer D 1 Point A B C D E F Production of grain Production of cars tons cars 0 30 2 28 4 24 6 18 8 10 10 0 4 The table above lists six points on the production possibilities frontier for grain and cars Given this information which of the following combinations is unattainable A 4 tons of grain and 26 cars B 6 tons of grain and 18 cars C 2 tons of grain and 27 cars D 7 tons of grain and 10 cars Answer A 5 The table above lists six points on the production possibilities frontier for grain and cars What is the opportunity cost of producing the 5th ton of grain A 2 cars B 3 cars C 16 cars D 6 cars Answer B 6 The table above lists six points on the production possibilities frontier for grain and cars What is the opportunity cost of producing the 26th car A 0 25 tons of grain B 4 tons of grain C 2 tons of grain D 0 5 tons of grain Answer D 2 7 In the figure above which of the curves shows a production possibilities frontier with increasing opportunity cost in the production of VCRs and telephones A A B B C C D All of the curves illustrate a production possibilities frontier with increasing opportunity cost in the production of VCRs and telephones Answer A 8 A tradeoff is illustrated by A a point inside the PPF C a change in the slope of the PPF B a point outside the PPF D the negative slope of the PPF Answer D 9 If Sam is producing at a point on his production possibilities frontier then he A is not subject to scarcity B cannot produce any more of either good C can produce more of one good only by producing less of the other D will be unable to gain from trade Answer C 3 10 Refer to the production possibilities frontier in the figure above Production point represents an production point A e inefficient B c inefficient C c unattainable D b unattainable Answer B 11 In the figure above moving from production at point d to production at point a requires A decreasing the output of consumer goods in order to boost the output of capital goods B technological change C a decrease in unemployment D both capital accumulation and a decrease in unemployment Answer A 12 Refer to the production possibilities frontier in the figure above Suppose a country is producing at point a A movement to point means that the country A d gives up 10 million consumer goods B e is not operating efficiently C b is producing at an inefficient point D d must give up 20 million capital goods Answer D 13 Refer to the production possibilities frontier in the figure above Which production point indicates that resources are NOT fully utilized or are misallocated A Point a B Point b C Point c D Point e Answer C 4 14 The opportunity cost of producing a unit of consumption at point b in the figure point a A is less than at B is the same as C is greater than at D cannot be compared with Answer A 15 When we cannot produce more of any good without giving up some other good that we value more highly we have achieved A production B equity C economic growth D allocative efficiency Answer D 16 Scarcity is represented on a production possibilities frontier figure by A the fact there are attainable and unattainable points B the amount of the good on the horizontal axis forgone C technological progress D the fact that there are only two goods in the diagra Answer A 17 The opportunity cost of economic growth is A investment that a nation gives up to increase its economic growth B present consumption that a nation gives up to accumulate capital C future consumption that a nation gets if it gives up some present consumption D future consumption that a nation gives up to consume more today Answer B 5 18 Two countries Alpha and Beta have identical production possibilities frontiers If Alpha produces at point a and Beta produces at point b then A Beta s economic growth rate will exceed Alpha s B Alpha s and Beta s economic growth rates will be the same C Beta s future consumption will be greater than Alpha s D Alpha consumes less than Beta today but it will grow faster than Beta Answer D 19 After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005 we can be sure that the production possibilities frontier for that area temporarily A shifted outward away from the origin B shifted inward toward the origin C became steeper D became flatter Answer B 20 A bowed out PPF reflects which of the following ideas i increasing opportunity cost ii resources are not equally productive in all activities iii prices of goods increase over time A i and iii B ii and iii C i ii and iii Answer E 6 D i only E i and ii