Deck 2: Trade-Offs,comparative Advantage,and the Market System

Question 1

The principle of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up.

A)marginal cost
B)opportunity cost
C)normative economics
D)entrepreneurship

Answer 1

B

Question 2

The production possibilities frontier shows

A)the various products that can be produced now and in the future.
B)the maximum attainable combinations of two products that may be produced in a particular time period with available resources.
C)what an equitable distribution of products among citizens would be.
D)what people want firms to produce in a particular time period.

Answer 2

B

Question 3

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.What is the opportunity cost of one dozen roses?

A)0.4 dozen orchids
B)2.5 dozen orchids
C)7.25 dozen orchids
D)16 dozen orchids

Answer 3

A

Question 4

If the production possibilities frontier is linear,then

A)opportunity costs are decreasing as more of one good is produced.
B)it is easy to efficiently produce output.
C)opportunity costs are increasing as more of one good is produced.
D)opportunity costs are constant as more of one good is produced.

Question 5

The production possibilities frontier model assumes all of the following except

A)labor,capital,land and natural resources are fixed in quantity.
B)the economy produces only two products.
C)any level of the two products that the economy produces is currently possible.
D)the level of technology is fixed and unchanging.

Question 6

________ exists because unlimited wants exceed the limited resources available to fulfill those wants.

A)Scarcity
B)Productive efficiency
C)The command economy
D)Economic growth

Question 7

Figure 2-1
Refer to Figure 2-1.________ is (are)inefficient in that not all resources are being used.

A)Point A
B)Point B
C)Point C
D)Points A and C

Question 8

In a production possibilities frontier model,a point inside the frontier is

A)allocatively efficient.
B)productively efficient
C)allocatively inefficient.
D)productively inefficient.

Question 9

Figure 2-1
Refer to Figure 2-1.________ is (are)unattainable with current resources.

A)Point A
B)Point B
C)Point C
D)Points A and C

Question 10

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.If Vidalia chooses to produce 60 dozen orchids,how many roses can it produce to maximize production?

A)30 dozen roses
B)50 dozen roses
C)100 dozen roses
D)150 dozen roses

Question 11

To compete in the automobile market,Tesla must make many strategic decisions such as whether to introduce a new car model,how to sell and service its cars,and where to advertise.At Tesla's Fremont,California plant,managers must decide on the monthly production quantities of their S and X models.In making this decision,the managers

A)face no trade-off because the Fremont plant only produces these two models of the many Tesla models produced worldwide.
B)face a trade-off,because producing more of one model means producing less of the others.
C)will choose to only produce the quantity of S and X models where marginal cost equals zero.
D)will always decide on production quantities in which revenues are maximized.

Question 12

Figure 2-1
Refer to Figure 2-1.________ is (are)technically efficient.

A)Point A
B)Point B
C)Point C
D)Points B and C

Question 13

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.What is the opportunity cost of one dozen orchids?

A)0.4 dozen roses
B)2.5 dozen roses
C)7.25 dozen roses
D)16 dozen roses

Question 14

________ shows that if all resources are fully and efficiently utilized,more of one good can be produced only by producing less of another good.

A)Comparative advantage
B)Absolute advantage
C)The mixed market system
D)The production possibilities frontier model

Question 15

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.If Vidalia chooses to produce 50 dozen roses,how many orchids can it produce to maximize production?

A)20 dozen orchids
B)40 dozen orchids
C)60 dozen orchids
D)80 dozen orchids

Question 16

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.Suppose Vidalia is currently producing 20 dozen orchids per period.How many roses is it also producing,assuming that resources are fully utilized?

A)30 dozen roses
B)50 dozen roses
C)100 dozen roses
D)150 dozen roses

Question 17

Carmelita can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures.If she now performs 35 manicures and 70 pedicures,what is the opportunity cost of performing an additional 15 manicures?

A)5 pedicures
B)20 pedicures
C)25 pedicures
D)45 pedicures

Question 18

The unattainable points in a production possibilities diagram are

A)the points within the production possibilities frontier.
B)the points along the production possibilities frontier.
C)the points of the horizontal and vertical intercepts.
D)the points outside the production possibilities frontier.

Question 19

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.If Vidalia chooses to produce 40 dozen orchids,how many roses can it produce to maximize production?

A)30 dozen roses
B)50 dozen roses
C)100 dozen roses
D)150 dozen roses

Question 20

The ________ production points on a production possibility curve are the points along and inside the production possibility frontier.

A)attainable
B)unattainable
C)productively efficient
D)allocatively efficient

Question 21

________ a nation's production possibilities frontier represents economic growth.

A)An outward shift of
B)An inward shift of
C)Moving up along
D)Moving down along

Question 22

Figure 2-3
Refer to Figure 2-3.Carlos Vanya grows tomatoes and strawberries on his land.A portion of his land is more suitable for growing tomatoes and the other portion is better suited for strawberry cultivation.Which of the graphs in Figure 2-3 represent his production possibilities frontier?

A)Graph A
B)Graph B
C)Graph C
D)either Graph A or Graph B
E)either Graph B or Graph C

Question 23

Increasing marginal opportunity cost implies that

A)the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.
B)the more resources already devoted to any activity,the benefits from allocating yet more resources to that activity decreases by progressively larger amounts.
C)that rising opportunity costs makes it inefficient to produce beyond a certain quantity.
D)the law of scarcity.

Question 24

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

A)linear
B)bowed inward
C)bowed outward
D)perfectly horizontal

Question 25

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 26

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 20 sliders and 60 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 27

Increasing opportunity cost along a bowed out production possibilities frontier occurs because

A)of inefficient production.
B)of ineffective management by entrepreneurs.
C)some factors of production are not equally suited to producing both goods or services.
D)of the scarcity of factors of production.

Question 28

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 25 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 29

An outward shift of a nation's production possibilities frontier can occur due to

A)a reduction in unemployment.
B)a natural disaster like a hurricane or bad earthquake.
C)a change in the amounts of one good desired.
D)an increase in the labor force.

Question 30

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 50 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 31

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 50 sliders and 50 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 32

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.If Vidalia chooses to produce 80 dozen roses,how many orchids can it produce to maximize production?

A)24 dozen orchids
B)48 dozen orchids
C)60 dozen orchids
D)74 dozen orchids

Question 33

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.

A)marginal revenue
B)total revenue
C)marginal cost
D)opportunity cost

Question 34

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 25 hot wings would appear

A)along Dina's production possibilities frontier.
B)inside Dina's production possibilities frontier.
C)outside Dina's production possibilities frontier.
D)at the vertical intercept of Dina's production possibilities frontier.

Question 35

Figure 2-3
Refer to Figure 2-3.Carlos Vanya grows tomatoes and strawberries on his land.His land is equally suited for growing either fruit.Which of the graphs in Figure 2-3 represents his production possibilities frontier?

A)Graph A
B)Graph B
C)Graph C
D)either Graph A or Graph B
E)either Graph B or Graph C

Question 36

If opportunity costs are ________,the production possibilities frontier would be graphed as a negatively sloped straight line.

A)decreasing
B)increasing
C)negative
D)constant

Question 37

Without technological advancement,how can a nation achieve economic growth?

A)by producing more high-value goods and fewer low-value goods
B)through an increase in supplies of factors of production
C)by producing more low-value goods and fewer high-value goods
D)by decreasing the size of the labor force

Question 38

Economic growth is represented on a production possibilities frontier model by the production possibility frontier

A)shifting outward.
B)shifting inward.
C)becoming steeper.
D)becoming flatter.

Question 39

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
Refer to Figure 2-2.The linear production possibilities frontier in the figure indicates that

A)Vidalia has a comparative advantage in the production of orchids.
B)Vidalia has a comparative disadvantage in the production of roses.
C)the tradeoff between roses and orchids is constant.
D)it is progressively more expensive to produce orchids.

Question 40

Table 2-1
Production Choices for Dina's Diner

Refer to Table 2-1.Dina faces ________ opportunity costs in the production of sliders and hot wings.

A)increasing
B)decreasing
C)constant
D)negative

Question 41

Figure 2-5
Refer to Figure 2-5.If the economy is currently producing at point X,what is the opportunity cost of moving to point W?

A)3 million tons of steel
B)19 million tons of steel
C)5 million tons of paper
D)9 million tons of paper

Question 42

Which of the following would shift a nation's production possibilities frontier inward?

A)discovering a cheap way to convert sunshine into electricity
B)producing more capital equipment
C)an increase in the unemployment rate
D)a law requiring workers to retire at age 50

Question 43

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following movements: a.from point V to point W
B.from point W to point Y
C.from point Y to point Z
Which of the movements listed above represents advancements in technology with respect to only plastic production?

A)a,b,and c
B)b and c only
C)b only
D)c only

Question 44

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.A movement from ________ is the result of additional government restrictions on the pollution that results from plastic production.

A)X to V
B)X to W
C)Z to W
D)Z to Y

Question 45

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following movements: a.from point V to point W
B.from point W to point Y
C.from point Y to point Z
Which of the movements listed above represents advancements in technology with respect to both plastic production and food production?

A)a,b,and c
B)b and c only
C)b only
D)c only

Question 46

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.A movement from ________ is the result of advancements in plastic production technology.

A)V to X
B)W to X
C)Z to W
D)Y to Z

Question 47

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.an increase in the unemployment rate
B.general technological advancement
C.an increase in consumer wealth
Which of the events listed above could cause a movement from Z to V ?

A)a only
B)a and b only
C)b and c only
D)a,b,and c

Question 48

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.a reduction in the patent protection period to no more than 2 years
B.a war that destroys a substantial portion of a nation's capital stock
C.the lack of secure and enforceable property rights system
Which of the events listed above could cause a movement from W to V?

A)a only
B)a and b only
C)a and c only
D)b and c only
E)a,b,and c

Question 49

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.a decrease in the unemployment rate
B.general technological advancement
C.an increase in consumer wealth
Which of the events listed above could cause a movement from V to X ?

A)a only
B)a and b only
C)b and c only
D)a,b,and c

Question 50

According to the production possibility model,if more resources are allocated to the production of physical and human capital,then all of the following are likely to happen except

A)fewer goods will be produced for consumption today.
B)the production possibilities frontier will be shift outward in the future.
C)future economic growth is enhanced.
D)the country's total production will fall.

Question 51

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.A movement from ________ could occur because of additional government restrictions toward allowing immigrant labor.

A)X to W
B)Y to X
C)V to W
D)W to X

Question 52

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.A movement from ________ could occur because of an influx of immigrant labor.

A)X to W
B)X to Y
C)W to V
D)W to X

Question 53

Figure 2-5
Refer to Figure 2-5.If the economy is currently producing at point Y,what is the opportunity cost of moving to point X?

A)5 million tons of steel
B)9 million tons of paper
C)5 million tons of paper
D)19 million tons of steel

Question 54

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.an increase in the unemployment rate
B.a decrease in a nation's money supply
C.a war that kills a significant portion of a nation's population
Which of the events listed above could cause a movement from Z to X ?

A)a,b and c
B)a and b only
C)a and c only
D)a only
E)c only

Question 55

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.an increase in the patent protection period to 75 years
B.a hurricane that destroys a substantial portion of a nation's capital stock
C.the implementation of a secure and enforceable property rights system
Which of the events listed above could cause a movement from W to Z?

A)a only
B)a and b only
C)a and c only
D)b and c only
E)a,b,and c

Question 56

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
Refer to Figure 2-4.Consider the following events: a.a decrease in the unemployment rate
B.an increase in technology with respect to both food and plastic production
C.a war that kills a significant portion of a nation's population
Which of the events listed above could cause a movement from W to Y ?

A)a,b and c
B)a and b only
C)a and c only
D)b only
E)c only

Question 57

Figure 2-5
Refer to Figure 2-5.If the economy is currently producing at point W,what is the opportunity cost of moving to point Y?

A)2 million tons of steel
B)14 million tons of steel
C)2 million tons of paper
D)9 million tons of paper

Question 58

If society decides it wants more of one good and ________,then it has to give up some of another good and incur some opportunity costs.

A)technology advances
B)resources are underutilized
C)all resources are fully utilized
D)new resources are discovered

Question 59

The recession of 2007-2009 would most likely be represented in a production possibilities frontier graph by

A)a point inside the frontier.
B)a point outside the frontier.
C)a point on the frontier.
D)an intercept on either the vertical or the horizontal axis.

Question 60

Suppose there is some unemployment in the economy and society decides that it wants more of one good.Which of the following statements is true?

A)It is not possible to achieve this unless technology advances.
B)It can increase output without giving up another good by employing more resources.
C)It will have to increase resource supplies.
D)It will have to give up production and consumption of some other good.

Question 61

Which of the following would shift a nation's production possibilities frontier outward?

A)discovering a more efficient process to desalinate water
B)an increase in the minimum wage
C)a decrease in the unemployment rate
D)more restrictive immigration policies

Question 62

Figure 2-6
Refer to Figure 2-6.If the economy is currently producing at point E,what is the opportunity cost of moving to point B?

A)26 thousand forks
B)20 thousand forks
C)60 thousand spoons
D)0 spoons

Question 63

A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days.This statement suggests that

A)students are more concerned about good grades than good health.
B)society should value sleep more highly than good grades.
C)there is a trade-off between studying and sleep.
D)society should value good grades more highly than sleep because students can catch up on their sleep once final exams are over.

Question 64

Table 2-2
Production choices for Nadia's Neckware

Refer to Table 2-2.Assume Nadia's Neckware only produces ascots and bowties.A combination of 16 ascots and 6 bowties would appear

A)along Nadia's production possibilities frontier.
B)inside Nadia's production possibilities frontier.
C)outside Nadia's production possibilities frontier.
D)at the horizontal intercept of Nadia's production possibilities frontier.

Question 65

Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a combination of 30 bird houses and 15 wind chimes.If he now produces 30 bird houses and 15 wind chimes,what is the opportunity cost of producing an additional 10 wind chimes?

A)2 bird houses
B)15 bird houses
C)30 bird houses
D)45 bird houses

Question 66

Figure 2-6
Refer to Figure 2-6.If the economy is currently producing at point E,what is the opportunity cost of moving to point D?

A)26 thousand forks
B)20 thousand forks
C)16 thousand spoons
D)0 spoons

Question 67

Figure 2-7 Mercedes Benz produces a full line of luxury automobiles,including coupes,sedans,and SUVs,at a variety of manufacturing plants across the globe.Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa,Alabama factory.Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory.
Refer to Figure 2-7.In response to changing consumer demands,Mercedes-Benz cuts back on the production of SUVs and increases its production of coupes.This strategy is best represented by

A)movement from E to F in Graph A.
B)movement from G to H in Graph B.
C)movement from K to L in Graph C.
D)movement from H to J in Graph B.

Question 68

Suppose your expenses for this term are as follows: tuition: $9,000,room and board: $1,500,books and other educational supplies: $1,000.Further,during the term,you can only work part-time and earn $3,000 instead of your full-time salary of $8,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?

A)$10,000
B)$13,000
C)$15,000
D)$18,000

Question 69

Figure 2-6
Refer to Figure 2-6.If the economy is currently producing at point C,what is the opportunity cost of moving to point B?

A)20 thousand spoons
B)26 thousand forks
C)40 thousand spoons
D)46 thousand forks

Question 70

Table 2-2
Production choices for Nadia's Neckware

Refer to Table 2-2.Assume Nadia's Neckties only produces ascots and bowties.Nadia faces ________ opportunity costs in the production of ascots and bowties.

A)increasing
B)decreasing
C)constant
D)negative

Question 71

An increase in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point inside the frontier.

Question 72

Suppose your expenses for this term are as follows: tuition: $5,000,room and board: $3,000,books and other educational supplies: $500.Further,during the term,you can only work part-time and earn $4,000 instead of your full-time salary of $10,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?

A)$5,500
B)$8,500
C)$11,500
D)$14,500

Question 73

Figure 2-7 Mercedes Benz produces a full line of luxury automobiles,including coupes,sedans,and SUVs,at a variety of manufacturing plants across the globe.Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa,Alabama factory.Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory.
Refer to Figure 2-7.Suppose Mercedes-Benz has to shut down a portion of its facility as it works on remodeling the facility to merge two of its separate assembly lines in preparation for the production of a new,hybrid models.The production decision to shut down temporarily will result in a

A)movement from E to F in Graph A.
B)movement from G to H in Graph B.
C)movement from K to L in Graph C.
D)movement from J to H in Graph B.

Question 74

Figure 2-6
Refer to Figure 2-6.If the economy is currently producing at point A,what is the opportunity cost of moving to point B?

A)16 thousand spoons
B)12 thousand forks
C)60 thousand spoons
D)46 thousand forks

Question 75

An inward shift of the production possibilities frontier represents

A)positive economic growth.
B)negative economic growth.
C)a rise in the unemployment rate.
D)technological improvement.

Question 76

Table 2-2
Production choices for Nadia's Neckware

Refer to Table 2-2.Assume Nadia's Neckware only produces ascots and bowties.A combination of 24 ascots and 12 bowties would appear

A)along Nadia's production possibilities frontier.
B)inside Nadia's production possibilities frontier.
C)outside Nadia's production possibilities frontier.
D)at the horizontal intercept of Nadia's production possibilities frontier.

Question 77

Figure 2-7 Mercedes Benz produces a full line of luxury automobiles,including coupes,sedans,and SUVs,at a variety of manufacturing plants across the globe.Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa,Alabama factory.Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory.
Refer to Figure 2-7.Suppose worker productivity increases so that the total number of vehicles produced increases as the company adds more machinery,workers and changes the layout of the factory.This is best represented by the

A)movement from E to F in Graph A.
B)movement from G to H in Graph B.
C)movement from K to L in Graph C.
D)movement from J to H in Graph B.

Question 78

Table 2-2
Production choices for Nadia's Neckware

Refer to Table 2-2.Assume Nadia's Neckware only produces ascots and bowties.A combination of 8 ascots and 18 bowties would appear

A)along Nadia's production possibilities frontier.
B)inside Nadia's production possibilities frontier.
C)outside Nadia's production possibilities frontier.
D)at the horizontal intercept of Nadia's production possibilities frontier.

Question 79

The opportunity cost of taking an on-line history class is

A)the knowledge and enjoyment you receive from taking the class.
B)the value of the time spent on line.
C)equal to the highest value of an alternative use of the time and money spent on the class.
D)zero because there is no classroom time involved if you are enrolled in the course.
E)the cost of tuition and fees only.

Question 80

Figure 2-6
Refer to Figure 2-6.If the economy is currently producing at point D,what is the opportunity cost of moving to point B?

A)16 thousand spoons
B)46 thousand forks
C)60 thousand spoons
D)0 forks