Question 1

Unemployment means
A)the same as underemployment.
B)a recession.
C)slow economic growth.
D)that not all resources are being used.

Accepted Answer

Unemployment refers to the situation where individuals who are willing and able to work are not employed. This implies that not all available labor resources in the economy are being utilized.

Question 2

The increasing cost in the law of increasing cost is a(n)____________ cost.
A)average
B)fixed
C)opportunity
D)declining

Accepted Answer

The law of increasing cost states that as the production of one good increases, the opportunity cost in terms of producing the second good increases as well. This means that the opportunity cost is increasing, making it a type of cost. The other options listed (average, fixed, and declining) do not accurately describe the concept of increasing cost.

Question 3

The law of increasing costs is based on each of the following,except
A)the law of scarcity.
B)the law of diminishing returns.
C)diseconomies of scale.
D)factor suitability.

Accepted Answer

The law of increasing costs primarily relates to the law of diminishing returns and factor suitability, where resources become less efficient as production increases. It also involves diseconomies of scale, where costs increase as a firm becomes too large. The law of scarcity, while fundamental to economics, does not directly explain the law of increasing costs, which is more about how costs rise with increased production due to factors like inefficiencies and resource limitations.

Question 4

According to the law of increasing costs,as a textile company spends more money to eliminate dust particles from the workplace to increase worker safety
A)the cost of reducing 70 percent of the dust in the factory will be the same as the cost of reducing the first 50 percent of the dust in the factory.
B)the cost of reducing 70 percent of the dust in the factory will be less than the cost of reducing the first 50 percent of the dust in the factory.
C)the cost of reducing 70 percent of the dust in the factory will be greater than the cost of reducing the first 50 percent of the dust in the factory.

Accepted Answer

The law of increasing costs states that as more resources are used to produce a good or service, the cost of producing each additional unit goes up. In the case of the textile company, as they spend more money to reduce dust particles in the workplace, the cost of reducing each additional percentage of dust will increase. Therefore, the cost of reducing 70 percent of the dust in the factory will be greater than the cost of reducing the first 50 percent of the dust in the factory.

Question 5

Suppose you had $1,000 to spend.You choose to spend the money on new clothes rather than on a new surfboard,your second choice or 1,000 lottery tickets,your third choice.
A)Your opportunity cost of spending the money on clothes is the $1,000 spent.
B)Your opportunity cost of spending the money on clothes is not buying the surfboard.
C)Your opportunity cost of spending the money on clothes is not buying the surfboard and the lottery tickets.
D)There is no opportunity cost in this instance.

Accepted Answer

Opportunity cost is the value of the next-best alternative forgone. In this case, the opportunity cost of spending $1,000 on clothes is not being able to spend it on a surfboard, which was the second choice. Choosing the lottery tickets would have a higher opportunity cost because the chance of winning is low, and the money could have been used for more certain alternatives like the surfboard or clothes. Therefore, the best choice is to spend the money on clothes, but recognizing the opportunity cost of not buying the surfboard.

Question 6

As we move along a production possibilities curve and acquire larger and larger amounts of one good (e.g. ,guns),the sacrifices of the alternative good (e.g. ,butter)become larger and larger.This is an illustration of
A)the law of demand.
B)the law of large numbers.
C)the law of supply.
D)decreasing opportunity costs.
E)increasing opportunity costs.

Accepted Answer

This situation illustrates increasing opportunity costs. This is because as we produce more and more of one good, we have to give up more and more of the other good, thus the opportunity cost of producing the good we are getting more of increases. Therefore, the correct answer is E.

Question 7

During 2009 and 2010,______ of Americans under 25 were unemployed.
A)one-half
B)one-third
C)one-quarter
D)three-quarters

Accepted Answer

During 2009 and 2010, one-quarter of Americans under 25 were unemployed. This was a significant impact of the global financial crisis that began in 2008, leading to high unemployment rates across various age groups, with young Americans being notably affected.

Question 8

The opportunity cost of spending four hours at a movie theater watching a double feature the night before a final exam would be
A)the cost of the movie ticket.
B)the cost of the subway fare to get to the theater.
C)the price of the popcorn and candy bars you snuck into the theater.
D)a higher grade on the exam.
E)All of the choices are true.

Accepted Answer

The opportunity cost of spending four hours at a movie theater watching a double feature the night before a final exam would be a higher grade on the exam, as the time spent at the theater could have been used for studying or reviewing material for the exam. The other options listed (movie ticket cost, subway fare, snack cost) are all monetary costs, but do not represent the true opportunity cost of choosing to spend time at the movies instead of studying.

Question 9

If we are operating inside our production possibilities frontier,
A)it is possible the economy is in a recession.
B)it is possible the economy is in a depression.
C)it is possible that the economy is in neither a recession or a depression.
D)All of the choices are correct.

Accepted Answer

Operating inside the production possibilities frontier indicates that an economy is not utilizing all its resources efficiently, which can happen during a recession, a depression, or even outside these conditions if there are other inefficiencies present.

Question 10

The closer we are to the production possibilities frontier and the farther away we are from the origin,
A)the more unemployment there is.
B)the less unemployment there is.
C)the only way to produce more guns will be to give up some butter production.
D)the only way to produce more butter will be to give up some gun production.

Accepted Answer

As we move closer to the production possibilities frontier, resources are being used more efficiently, leading to less unemployment.

Question 11

An increase in the unemployment rate would be shown on a production possibilities curve by
A)shifting the entire curve outward.
B)shifting the entire curve inward.
C)moving from a point on or near the curve to a point closer to the origin,rather than shifting the entire curve.
D)moving from a point inside the curve to a point on or at least closer to,the curve,rather than shifting the entire curve.

Accepted Answer

An increase in unemployment means that not all resources are being used efficiently, so the economy would operate inside the production possibilities curve, moving closer to the origin.

Question 12

If the production possibilities frontier were a straight line,
A)the Law of Increasing Cost would still apply.
B)the opportunity cost of producing one good would decrease as more of another good is produced.
C)the opportunity cost of producing one good would increase as more of another good is produced.
D)the opportunity cost of producing one good would remain the same as more of another good is produced.

Accepted Answer

When the production possibilities frontier is a straight line, it indicates that the opportunity cost of producing one good remains constant as more of another good is produced. This is because the resources are perfectly interchangeable between the two goods, and there is no specialization or increasing marginal cost involved. Therefore, the answer is D.

Question 13

The law of increasing costs states that
A)opportunity costs decrease as more of one good is produced.
B)increasing resource prices are inevitable because of scarcity.
C)opportunity costs increase as more of one good is produced.
D)resources can be easily adapted to the production of any gooD.
E)economic growth is always associated with inflation.

Accepted Answer

The law of increasing costs states that as the production of a particular good increases, the opportunity cost of producing each additional unit of that good increases. This is because resources are not equally efficient in producing different goods, and as more of one good is produced, resources less suited for its production must be used, resulting in higher opportunity costs.

Question 14

An economy operating its plant and equipment at full capacity implies a capacity utilization rate of
A)40 percent.
B)70 percent.
C)85 percent.
D)100 percent.

Accepted Answer

The answer of An economy operating its plant and equipment...

Question 15

The United States was able to produce temporarily outside its production possibilities curve for several years during World War II by doing which of the following?
A)Recruiting housewives to work in tank and airplane factories.
B)Convincing workers who qualified for retirement to put off retirement.
C)Pressing older machinery and equipment into use.
D)Expansion of the work week.
E)All of the choices are true

Accepted Answer

All of the choices are true. The United States was able to produce temporarily outside its production possibilities curve during World War II by recruiting women to work in industries, persuading workers who qualified for retirement to remain in their jobs, pressing older machinery and equipment into service, and expanding the workweek. These measures helped increase the output of goods and services beyond what the economy was previously capable of producing.

Question 16

According to the law of increasing costs,as the United States expends more of its resources on reducing air pollution,
A)the quantity of other goods that must be given up for further reductions in air pollution will decrease.
B)the quantity of other goods that must be given up for further reductions in air pollution will increase.
C)the social cost of additional air pollution will increase.
D)there will be no change in the marginal cost of reducing air pollution.

Accepted Answer

The law of increasing costs states that as the production of one good increases, the opportunity cost of producing the next unit also increases. Therefore, as the United States expends more resources on reducing air pollution, the opportunity cost of further reductions will also increase. This means that more of other goods and services will have to be given up to achieve further reductions in air pollution. Thus, the quantity of other goods that must be given up for further reductions in air pollution will increase.

Question 17

Which of the following is the most accurate statement?
A)Employment discrimination has been diminished,but has not yet been wiped out.
B)Federal laws do not restrict child labor.
C)Underemployment of women,blacks and other Americans has increased substantially since the 1950s.
D)Although there was substantial employment discrimination in the past,there is virtually none today.

Accepted Answer

While efforts have been made to decrease employment discrimination, it still exists in today's society. It may not be as prevalent as it was in the past, but it still persists. B is incorrect as federal laws do prohibit child labor. C is incorrect as the underemployment of women and minorities has decreased since the 1950s. D is also incorrect as discrimination still exists in today's society.

Question 18

A small Caribbean island-country produces only pineapples and rum.If resources are used efficiently in the economy,
A)it will not be possible to produce more rum without decreasing the production of pineapples.
B)it will be possible to produce more pineapples without decreasing the production of rum.
C)it will be producing on its production possibilities curve.
D)it will not be possible to produce more rum without decreasing the production of pineapples AND it will be producing on its production possibilities curve.
E)it will be possible to produce more pineapples without decreasing the production of rum AND it will be producing on its production possibilities curve.

Accepted Answer

When resources are used efficiently in an economy, it means the economy is operating on its production possibilities curve (PPC). At any point on the PPC, to produce more of one good (e.g., rum), the production of the other good (e.g., pineapples) must decrease, due to the limited resources. This is known as the principle of opportunity cost.

Question 19

Which of the following statements about the concept of opportunity cost is true?
A)The opportunity cost of a decision is the cost of all possible alternatives to the good produced.
B)Many decisions do not involve an opportunity cost.
C)If you have an economics final and an American history final tomorrow,the opportunity cost of studying five hours for your economics exam is the five hours you cannot study for your history exam.
D)The opportunity cost of a college education at a school where you have to drive 100 miles per week is the cost and maintenance of owning an automobile to drive to and from school.

Accepted Answer

The concept of opportunity cost refers to the cost of the best alternative forgone, or the cost of what you could have done instead of the chosen option. Therefore, if you choose to study for your economics exam, the opportunity cost is the time you could have spent studying for your history exam. Option A is incorrect because the opportunity cost refers only to the best alternative forgone, not all possible alternatives. Option B is incorrect because every decision involves an opportunity cost. Option D is incorrect because the opportunity cost of a college education at a school where you have to drive 100 miles per week is not the cost of owning a car, but instead the cost of other possible alternatives, such as attending a school that is closer to your home.

Question 20

Each of the following is an example of capital,except
A)an office building.
B)gold in a gold mine.
C)an assembly line.
D)a computer system.

Accepted Answer

Gold in a gold mine is a natural resource, not a form of capital. The other options (office building, assembly line, computer system) are all examples of capital because they are man-made goods used in the production process.

Quiz 2: Resource Utilization

Unemployment means

The increasing cost in the law of increasing cost is a(n) ____________ cost.

The law of increasing costs is based on each of the following,except

According to the law of increasing costs,as a textile company spends more money to eliminate dust particles from the workplace to increase worker safety

Suppose you had $1,000 to spend.You choose to spend the money on new clothes rather than on a new surfboard,your second choice or 1,000 lottery tickets,your third choice.

As we move along a production possibilities curve and acquire larger and larger amounts of one good (e.g. ,guns) ,the sacrifices of the alternative good (e.g. ,butter) become larger and larger.This is an illustration of

During 2009 and 2010,______ of Americans under 25 were unemployed.

The opportunity cost of spending four hours at a movie theater watching a double feature the night before a final exam would be

If we are operating inside our production possibilities frontier,

The closer we are to the production possibilities frontier and the farther away we are from the origin,

An increase in the unemployment rate would be shown on a production possibilities curve by

If the production possibilities frontier were a straight line,

The law of increasing costs states that

An economy operating its plant and equipment at full capacity implies a capacity utilization rate of

The United States was able to produce temporarily outside its production possibilities curve for several years during World War II by doing which of the following?

According to the law of increasing costs,as the United States expends more of its resources on reducing air pollution,

Which of the following is the most accurate statement?

A small Caribbean island-country produces only pineapples and rum.If resources are used efficiently in the economy,

Which of the following statements about the concept of opportunity cost is true?

Each of the following is an example of capital,except