Deck 2: Production, Economic Growth, and Trade

Question 1

The "what" question primarily refers to:

A) the mix of goods and services that are produced.
B) production efficiency.
C) whether the goods and services are produced under a communist system or a democratic system.
D) who gets the goods and services.

Answer 1

A

Question 2

Which of these questions would NOT be considered one of the basic economic questions?

A) Should Brazil continue to produce ethanol?
B) What production method should be used to make batteries for plug-in cars?
C) When will the new high-speed train in California be completed?
D) To whom will the production of solar panels be sold to?

Answer 2

C

Question 3

Which of these would be least likely to increase economic growth?

A) An increase in investment in infrastructure such as new roads and rail lines.
B) An increase in tariffs to protect domestic industries from foreign competition.
C) An expansion of financial aid options to college students.
D) Protecting intellectual property rights (such as patents) to provide incentives for innovation.

Answer 3

B

Question 4

The main reason why a production possibilities frontier would have a concave shape is:

A) because of decreasing opportunity costs
B) because the rate at which one good can be substituted for another is fixed.
C) because as a country specializes in one product, it must give up more of the other.
D) because consumers face diminishing marginal returns in consumption.

Question 5

Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE?

A) Costa Rica has an absolute advantage in medical device production, while Vietnam has an absolute advantage in coffee production.
B) Costa Rica has a comparative advantage in the production of both coffee and medical devices.
C) Costa Rica has a comparative advantage in coffee production, while Vietnam has a comparative advantage in the production of medical devices.
D) Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.

Question 6

For a country to have a comparative advantage in a good, it must have:

A) more labor to produce that good
B) more capital to produce that good
C) an ability to produce more of that good than another country has
D) a lower opportunity cost of producing that good

Question 7

(Figure) The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency?

A) from A to B
B) from B to C
C) from C to B
D) from D to B

Question 8

What does the term "laissez-faire" mean in economics?

A) Government plays a major role regulating businesses to protect consumers.
B) Government does not intervene in personal decisions but it controls economic decisions.
C) The market economy requires intervention to ensure efficiency.
D) The role of government should be as minimal as possible.

Question 9

Which of the following is not possible for two countries who trade computers and automobiles with one another?

A) One of the countries has an absolute advantage in the production of both products.
B) One of the countries has a comparative advantage in the production of both products.
C) One country has an absolute advantage in one product and a comparative advantage in the other product.
D) One country does not have an absolute advantage in either product but has a comparative advantage in one product.

Question 10

Which is NOT one of the three basic economic questions that each society must answer?

A) What goods and services are to be produced?
B) How are the goods and services to be produced?
C) Who decides what goods and services are in demand?
D) Who will receive the goods and services?

Question 11

(Figure) The area between which two points on the PPF could represent an improvement in allocative efficiency?

A) from A to B
B) from A to C
C) from B to C
D) from B to D

Question 12

To answer the question of how goods and services are to be produced, society must decide:

A) what products businesses want to produce.
B) how to combine its scarce resources to produce the desired products.
C) what products the government wants.
D) what products to export.

Question 13

Which of these would NOT be considered a factor of production?

A) mineral deposits
B) a large copy machine at the office
C) college graduates seeking a job
D) a bank loan used to start a new business

Question 14

Which is NOT considered a basic economic question?

A) How will the system accommodate change?
B) What goods and services will be produced?
C) Who will receive the goods and services?
D) How will these goods and services be produced?

Question 15

China produces many products at the lowest cost possible, even though Chinese consumers do not desire many of these products (e.g., football helmets). China is achieving:

A) production efficiency only
B) allocative efficiency only
C) both production efficiency and allocative efficiency
D) neither production efficiency nor allocative efficiency

Question 16

Why is entrepreneurial ability considered a factor of production?

A) because it is a physical input such as land, labor, and capital
B) because entrepreneurs assume the risk of producing output, an important part of the production process
C) because entrepreneurs work very long hours and demand large profits for the work that they accomplish
D) because it is an input that can be used by itself to produce many goods and services desired by society

Question 17

Trade is:

A) a way for rich countries to take advantage of poorer countries.
B) good for rich countries and bad for poorer countries.
C) something that slows down the economies of the trading countries.
D) a driver of economic growth.

Question 18

(Figure) What would be a reason why an economy is operating at point D?

A) A reduction in business investment causes unemployment to increase.
B) There is a new technological breakthrough in the production of energy-efficient airplanes.
C) An economy uses all of its inputs efficiently but changes the ratio of the goods produced.
D) An economy experiences an influx of immigrants seeking jobs.

Question 19

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange?

A) 0.4 of an orange
B) 0.4 of a grapefruit
C) 2.5 oranges
D) 2.5 grapefruits

Question 20

Using the productivity rates for Spain and Portugal, which statement is TRUE?

A) Spain has a comparative advantage in olives.
B) Portugal has a comparative advantage in olives.
C) Both Portugal and Spain have a comparative advantage in oranges.
D) Both Spain and Portugal have a comparative advantage in olives.

Question 21

Which of these is NOT an economic factor of production?

A) land
B) entrepreneurial ability
C) money
D) labor

Question 22

In a _____ economy, individuals and firms own most resources, and in a _____ economy, the government controls most resources.

A) market; planned
B) planned; socialist
C) planned; market
D) socialist; planned

Question 23

In a market economy, product prices do NOT help to determine how:

A) consumers decide whether to buy or not buy.
B) firms employ their resources.
C) firms decide which production technology to use.
D) governments allocate their resources.

Question 24

_____ refers to the way an economy allocates goods and services to consumers.

A) Production
B) Capital
C) Distribution
D) Absolute advantage

Question 25

The conversion of resources to satisfy wants is described as:

A) consumption.
B) distribution.
C) production.
D) conservation.

Question 26

Which is NOT one of the basic economic questions that each society must answer?

A) What goods and services are to be produced?
B) How are these goods and services to be produced?
C) How much do we pay those who produce the goods and services?
D) Who will receive these goods and services?

Question 27

Which of the following is part of a planned economy?

A) Private individuals and firms own most resources.
B) Product prices are primarily determined by the interaction of demand and supply.
C) Most of the productive resources are owned by the state.
D) Consumers are free to decide what goods and services to purchase.

Question 28

In a communist state, the _____ decide(s) what a society wants, but in a capitalist economy, the _____ decide what products they want.

A) government; producers
B) consumers; producers
C) government; consumers
D) producers; consumers

Question 29

The Scandinavian countries of Europe:

A) have economies coordinate solely by markets.
B) allow a large role for government services.
C) have no barriers to the market.
D) do not protect property rights.

Question 30

Planned economies rely heavily on _____ to make most economic decisions.

A) consumers
B) producers
C) the government
D) corporations

Question 31

Which statement is NOT part of a market economy?

A) Most economic decisions are made by central governments.
B) Product prices are the principal mechanism for communicating information in the system.
C) Consumers are free to decide what goods and services to purchase.
D) The government plays a primary role in protecting private property rights.

Question 32

The way an economy allocates output to consumers is called:

A) distribution.
B) efficiency.
C) government allocation.
D) output maximization.

Question 33

A laissez-faire approach to the question of "how to produce" would be found in a:

A) socialist economy.
B) communist economy.
C) market economy.
D) planned economy.

Question 34

Which is NOT a basic economic question that societies must answer?

A) What goods and services are to be produced?
B) How are the goods and services to be produced?
C) Why are these goods and services being produced?
D) For whom are the goods and services being produced?

Question 35

Capital, which includes all manufactured products that are used to produce other goods and services, earns:

A) profit.
B) wages.
C) interest.
D) rent.

Question 36

In a planned economy, most of the productive resources are owned by:

A) households.
B) business firms.
C) the government.
D) foreign countries.

Question 37

A market economy is also known as a _____ economy, and decisions are made by _____.

A) capitalist; the government
B) capitalist; private individuals
C) socialist; the government
D) socialist; private individuals

Question 38

In a capitalist economy, the answer to the question "What should be produced?" is determined by:

A) the government.
B) consumers' demands for specific goods and services.
C) producers.
D) government and producers acting together.

Question 39

What are the three basic economic questions each society must answer?

A) what to produce; how to produce; for whom to produce
B) how much to produce; what quality to produce; what price to sell at
C) what to produce; how to much to produce, how to consume
D) how much goes to government; how much goes to consumers; how much is exported

Question 40

In a pure market economy, the government's primary roles do NOT include:

A) protecting property rights.
B) enforcing contracts between private parties.
C) providing public goods, such as national defense.
D) reallocating resources across the economy.

Question 41

The resource known as "labor" includes:

A) physical labor only.
B) physical and mental skills and talents.
C) people willing to do physical and difficult work.
D) the work of legal workers.

Question 42

The payment to entrepreneurship is called:

A) rent.
B) wages.
C) interest.
D) profit.

Question 43

Natural resources in the production process are called _____, and their payment is called _____.

A) capital; rent
B) labor; interest
C) land; rent
D) land; wages

Question 44

Which of the following is NOT an example of an improvement to human capital?

A) students taking a course in economics
B) increasing the number of machines available to workers
C) an intensive internship program
D) an employee learning to use Microsoft Access

Question 45

Economists refer to "rent" as a payment to:

A) housing.
B) land.
C) capital.
D) labor.

Question 46

What is considered a labor resource?

A) a sewing machine
B) a trainee
C) mineral deposits
D) a copier

Question 47

Which is considered a land resource?

A) a sewing machine
B) an apprentice
C) mineral deposits
D) a copier

Question 48

Natural resources such as copper deposits are:

A) capital.
B) land.
C) labor.
D) investment capital.

Question 49

Land as a productive resource does NOT include:

A) mineral deposits.
B) oil.
C) water.
D) computers.

Question 50

Economists refer to the payment to land as:

A) rent.
B) wages.
C) interest.
D) profit.

Question 51

Entrepreneurs receive profits for their efforts primarily because they:

A) combine land, labor, and capital to produce goods and services.
B) combine land, labor, and capital to produce goods and services and assume the risks associated with business.
C) assume the risks associated with business.
D) have the best ideas.

Question 52

Land:

A) is not a scarce resource.
B) earns rent.
C) earns interest.
D) is only agricultural.

Question 53

The payment to land is called:

A) rent.
B) wages.
C) interest.
D) profit.

Question 54

The concept of human capital is important to economists because:

A) improvements to human capital lead to higher standards of living.
B) it compares people with machinery.
C) it helps managers plan for future growth.
D) it shows ways for firms to reduce costs.

Question 55

In economics, the term "land" includes:

A) mostly agricultural land.
B) natural resources excluding water resources.
C) all natural resources.
D) resources found on the Earth's surface.

Question 56

If a pizza parlor uses an oven in its production process, the oven is an example of which factor of production?

A) capital
B) entrepreneurial ability
C) labor
D) land

Question 57

Economists refer to the payment to capital as:

A) rent.
B) wages.
C) interest.
D) profit.

Question 58

In economics, capital refers to:

A) funds used by businesses to acquire goods and services.
B) the process of raising money in the stock market.
C) actual manufactured buildings and equipment used in the production process.
D) anything that adds to human capital.

Question 59

Which is an example of capital in the production process of an amusement park?

A) the electricity used at the park
B) the mechanics who maintain the equipment
C) the roller coaster
D) the ticket-taker

Question 60

Human capital is:

A) the improvement of labor capabilities from training, education, and apprenticeship programs.
B) the equipment that companies use in the production process.
C) included in the land resource.
D) included in entrepreneurial ability.

Question 61

When the mix of goods and services produced is just what society desires, then __________ exists.

A) socialism.
B) communism.
C) production efficiency.
D) allocative efficiency.

Question 62

When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible:

A) production efficiency is achieved.
B) allocative efficiency is achieved.
C) production and allocative efficiency are achieved.
D) inefficiency occurs.

Question 63

"Production efficiency" is described as:

A) goods and services that are produced using the fewest resources possible.
B) the mix of goods and services produced being just what society desires.
C) one country having a lower opportunity cost of producing a good than another country.
D) one country being able to produce more of a good than another country.

Question 64

Which statement about entrepreneurs is NOT correct?

A) Entrepreneurs combine other resources to produce goods and services.
B) Entrepreneurs manage the day-to-day marketing, finance, and production decisions.
C) The payment that entrepreneurs earn is called profit.
D) Entrepreneurs do not take on any business risks.

Question 65

All of these are considered human capital, EXCEPT:

A) working in a factory.
B) obtaining a college education.
C) receiving training for another area in a current job.
D) completing a professional development course.

Question 66

When a society is producing the mix of goods that the society wants to consume, then it is said to have:

A) solved the economic problem.
B) an equitable distribution of goods and services.
C) an efficient form of government.
D) obtained allocative efficiency.

Question 67

_____ occurs when goods and services are produced with as few resources as possible, while _____ occurs when the mix of goods and services produced is the most desired by society.

A) Allocative efficiency; production efficiency
B) Production efficiency; social efficiency
C) Allocative efficiency; social efficiency
D) Production efficiency; allocative efficiency

Question 68

_____ combine land, labor, and capital to produce goods and services and assume the risks associated with running businesses.

A) Economists
B) Capital marketers
C) Entrepreneurs
D) Financiers

Question 69

Capital includes all of these EXCEPT:

A) dollar bills in a bank vault.
B) copy machines in an insurance company.
C) tractor loaders of a construction firm.
D) drilling equipment at a tool-and-die company.

Question 70

Capital:

A) refers to commercial bank-lending policies.
B) is any manufactured product that is used to produce other products.
C) is a field of corn.
D) is the only element that is needed to turn resources into products.

Question 71

Which pair does NOT relate?

A) capital-interest
B) land-revenue
C) labor-wages
D) entrepreneurial ability-profit

Question 72

Economists refer to the payment to labor as:

A) rent.
B) wages.
C) interest.
D) profit.

Question 73

_____ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

A) Allocative efficiency
B) Production efficiency
C) Opportunity cost
D) Cost allocation

Question 74

In economics, the term "capital" refers to:

A) money available to firms.
B) markets where companies go to raise funds.
C) the primary city in each governmental jurisdiction where most economic activity occurs.
D) manufactured buildings and equipment used to produce other goods and services.

Question 75

When an economy is producing the mix of goods and services MOST desired by society, that economy is considered to have:

A) productive efficiency.
B) productive equitability.
C) allocative efficiency.
D) allocative equitability.

Question 76

Which statement is TRUE regarding production efficiency?

A) Efficiency and cost are unrelated concepts.
B) Production efficiency is independent of the type of technology used.
C) Producing at the lowest possible resource cost is equivalent to getting as much output as possible from a given set of resources.
D) The most economically efficient production technology is not always the cheapest.

Question 77

Which of these items restricts our choices so that we must make tradeoffs?

A) time and money
B) money and personal preferences
C) time and personal preferences
D) time, money, and personal preferences

Question 78

In economics, the payment to capital is called:

A) wages.
B) interest.
C) capitalization.
D) profit.

Question 79

Entrepreneurs:

A) take no risks, if they are smart.
B) earn wages for their work.
C) combine and manage inputs of land, labor, and capital.
D) earn rents for their work.

Question 80

The production of too many Matchbox cars and not enough Barbie Dolls is an example of:

A) production inefficiency.
B) allocative inefficiency.
C) technical inefficiency
D) labor inefficiency.