Deck 2: The Economic Problem

Question 1

On a graph of a production possibilities frontier,opportunity cost is represented by

A)a point on the horizontal axis.
B)a point on the vertical axis.
C)a ray through the origin.
D)the slope of the production possibilities frontier.
E)the x-axis intercept.

Answer 1

D

Question 2

Which one of the following concepts is illustrated by a production possibilities frontier?

A)profit
B)consumption
C)investment
D)monetary exchange
E)the tradeoff between producing one good versus another

Answer 2

E

Question 3

Use the figure below to answer the following questions.
Figure 2.1.1
Refer to the production possibilities frontier in Figure 2.1.1.Which one of the following is true about point A?

A)It is unattainable.
B)While no more of good Y can be produced,more of good X can be produced.
C)It is preferred to point B.
D)Resources are either unused or misallocated or both.
E)It is attainable only if the amount of capital goods is increased.

Answer 3

D

Question 4

If Harold must decrease production of some other good to increase production of good X,then Harold

A)is producing on his production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)must prefer good X to any other good.
E)has too few capital goods.

Question 5

If Sam is producing at a point on his production possibilities frontier,then he

A)cannot produce any more of either good.
B)is unaffected by costs and technology.
C)can produce more of both goods.
D)is not subject to scarcity.
E)can increase the production of one good only by decreasing the production of the other.

Question 6

A point inside a production possibilities frontier

A)indicates some unused or misallocated resources.
B)is unattainable.
C)is preferred to a point on the production possibilities frontier.
D)indicates a point of production efficiency.
E)illustrates the idea of opportunity cost.

Question 7

A tradeoff exists when

A)we move from a point within the production possibilities frontier (PPF)to a point on the PPF.
B)we move from a point on the PPF to a point within the PPF.
C)the PPF shifts outward.
D)we move along the PPF.
E)the PPF shifts towards the origin.

Question 8

Which of the following quotations best illustrates a tradeoff?

A)"If the firm reorganized its production process,it could produce more widgets and more gadgets."
B)"The firm should sell more gadgets,even if it means less widget sales."
C)"The more and more gadgets the firm produces,the bigger the fall in widget production."
D)"If the firm invests more in capital equipment,it can expand sales next year."
E)"The firm has been able to lower costs due to its extensive experience in building widgets."

Question 9

Complete the following sentence.In Figure 2.1.1,

A)movement from A to B would require a technological advance.
B)point B is a point of production efficiency.
C)some resources must be unused at point C.
D)the concept of decreasing opportunity cost is illustrated.
E)movement from C to B would require a technological improvement.

Question 10

Refer to the production possibilities frontier in Figure 2.1.1,which one of the following is true about point C?

A)It is attainable only if we consume more of good X.
B)It is unattainable.
C)It is attainable only if we consume less of good Y.
D)It is attainable only if we consume less of good X.
E)It is attainable only if we consume more of good Y.

Question 11

The production possibilities frontier

A)is the boundary between attainable and unattainable levels of production.
B)is the boundary between what we want to consume and what we want to produce.
C)shows how production increases as prices rise.
D)shows prices at which production is possible and impossible.
E)illustrates why there need not be any scarcity in the world.

Question 12

Ted chooses to study for his economics exam instead of going to the concert.The concert he will miss is Ted's ________ of studying for the exam.

A)monetary cost
B)absolute cost
C)opportunity cost
D)discretionary cost
E)comparative cost

Question 13

Production efficiency is achieved when

A)the production possibilities frontier shifts outward at an even pace.
B)there are no more tradeoffs.
C)all resources are equally productive in all activities.
D)resources are not equally productive in all activities.
E)we produce goods and services at the lowest possible cost.

Question 14

If Harold can increase production of good X without decreasing production of any other good,then Harold

A)is producing on his production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)must have a linear production possibilities frontier.
E)must prefer good X to any other good.

Question 15

Which one of the following concepts is not illustrated by a production possibilities frontier?

A)scarcity
B)monetary exchange
C)opportunity cost
D)attainable and unattainable points
E)the tradeoff between producing one good versus another

Question 16

If Sam is producing at a point inside his production possibilities frontier,then he

A)can increase production of both goods with zero opportunity cost.
B)is fully using all his resources and allocating his resources to their best use.
C)must be doing the best he can with limited resources.
D)is unaffected by costs and technology.
E)has a high opportunity cost of moving from this point.

Question 17

A situation in which resources are either unused or misallocated or both is represented in a production possibilities frontier diagram by

A)any point on either the horizontal or the vertical axis.
B)a point above or to the right of the production possibilities frontier.
C)a point outside the production possibilities frontier.
D)a point inside the production possibilities frontier.
E)a point on or inside the production possibilities frontier.

Question 18

Opportunity cost of an action is

A)the best choice that can be made.
B)the highest-valued alternative forgone.
C)the money cost.
D)the comparative cost.
E)the absolute cost.

Question 19

The concept of opportunity cost

A)cannot be explained by using a production possibilites frontier.
B)explains that goods are swapped for other goods.
C)implies that when a person is more efficient in the production of one good,he should produce that good and exchange it for some good that he is relatively less efficient at producing.
D)implies that a double coincidence of wants must be present for exchange to take place.
E)implies that because productive resources are scarce,we must give up some of one good to acquire more of another.

Question 20

A production possibilities frontier is negatively sloped because

A)more goods are purchased as price falls.
B)of opportunity cost.
C)some resources are unused.
D)there is not enough capital in the economy.
E)of increasing consumption.

Question 21

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.Suppose that 50 units of Y are currently being produced.Then

A)7 units of X are being produced.
B)6 units of X can be produced if all resources are used and assigned to the task for which they are the best match.
C)9 units of X can be produced if all resources are used and assigned to the task for which they are the best match.
D)resources are not being fully utilized.
E)6 units of X are being produced.

Question 22

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point A,the opportunity cost of producing 3 more units of X

A)is 30 units of Y.
B)is 3 units of X.
C)is 20 units of Y.
D)is 10 units of Y.
E)cannot be determined from the diagram.

Question 23

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.One day,the firm decides it would like to produce 16 units of medical services and 5 units of secretarial services.This output level is

A)efficient.
B)unattainable.
C)inefficient.
D)costless.
E)attainable and efficient.

Question 24

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.The opportunity cost of one more unit of medical services is

A)2 units of secretarial services.
B)5 units of secretarial services.
C)0.4 units of secretarial services.
D)2.5 units of secretarial services
E)dependent on the level of services.

Question 25

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point A,the opportunity cost of increasing production of Y to 80 units is

A)10 units of Y.
B)80 units of Y.
C)2 units of X.
D)3 units of X.
E)1 unit of X.

Question 26

If opportunity costs are increasing,then the production possibilities frontier

A)will be bowed out and have a positive slope.
B)will be positively sloped.
C)will be linear and have a negative slope.
D)will be bowed out and have a negative slope.
E)reflects the fact that available resources are equally useful in all production activities.

Question 27

The existence of increasing opportunity cost

A)explains why specialization is frequently useful.
B)explains why resources are scarce.
C)explains the bowed-out shape of the production possibilities frontier.
D)follows from the existence of property rights.
E)explains why some societies produce inside their production possibilities frontier.

Question 28

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.If 6 units of X are currently being produced,then

A)40 units of Y cannot be produced unless production of X is decreased.
B)40 units of Y cannot be produced unless production of X is increased.
C)60 units of Y can be produced with some resources not fully used.
D)50 units of Y must be produced,regardless of resource utilization.
E)50 units of Y can be produced if all resources are used and assigned to the task for which they are the best match.

Question 29

Use the figure below to answer the following questions.
Figure 2.1.3
Refer to the production possibilities frontier in Figure 2.1.3.The opportunity cost of moving from C to B will be

A)greater than moving from D to C but less than moving from B to A.
B)less than moving from D to C but greater than moving from B to A.
C)the same as moving from D to C or moving from B to A.
D)greater than moving either from D to C or from B to A.
E)neither greater than moving from D to C nor moving from B to A.

Question 30

Use the figure below to answer the following questions.
Figure 2.1.3
Figure 2.1.3 illustrates Mary's production possibilities frontier.If Mary wants to move from point B to point C,

A)it will be necessary to improve technology.
B)it will be necessary to increase the accumulation of capital.
C)it will be necessary to give up some of good X to obtain more of good Y.
D)it will be necessary to give up some of good Y to obtain more of good X.
E)she can accomplish this without any opportunity cost.

Question 31

The fact that resources are not equally productive in all activities

A)implies that a production possibilities frontier will be bowed outward.
B)implies that gains from specialization and trade are unlikely.
C)follows from the law of demand.
D)implies a linear production possibilities frontier.
E)implies that an economy should not produce certain goods.

Question 32

If additional units of any good could be produced at a constant opportunity cost,the production possibilities frontier would be

A)bowed inward.
B)bowed outward.
C)positively sloped.
D)negatively sloped.
E)linear.

Question 33

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point C,what is the opportunity cost of increasing the production of Y from 20 to 50 units?

A)6 units of X
B)2 units of X
C)8 units of X
D)20 units of Y
E)30 units of Y

Question 34

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.One day,the firm decides it would like to produce 10 units of medical services and 30 units of secretarial services.This output level is

A)efficient.
B)unattainable.
C)inefficient.
D)costless.
E)is attainable if the firm reduces the number of its workers.

Question 35

Use the figure below to answer the following questions.
Figure 2.1.3
Figure 2.1.3 illustrates Mary's production possibilities frontier.If Mary wants to move from point D to point C,

A)it will be necessary to improve technology.
B)it will be necessary to increase the accumulation of capital.
C)it will be necessary to give up some of good X to obtain more of good Y.
D)it will be necessary to give up some of good Y to obtain more of good X.
E)she can accomplish this without any opportunity cost.

Question 36

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.The production possibilities frontier of this firm would show

A)increasing opportunity cost.
B)decreasing opportunity cost.
C)constant opportunity cost.
D)zero opportunity cost.
E)infinite opportunity cost.

Question 37

As we increase the production of X,we find we must give up larger and larger amounts of Y per unit of X.Select the best statement.

A)This illustrates increasing opportunity cost.
B)As a result,we should not specialize in the production of X.
C)The production possibilities frontier for X and Y is a straight line.
D)Good Y will be more highly regarded by consumers than good X.
E)We must be inside the production possibilities frontier.

Question 38

The bowed-out (concave)shape of a production possibilities frontier

A)is due to the equal usefulness of resources in all activities.
B)is due to capital accumulation.
C)is due to technological change.
D)reflects the existence of increasing opportunity cost.
E)reflects the existence of decreasing opportunity cost.

Question 39

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point C,the opportunity cost of producing one more unit of X is

A)1 unit of Y.
B)1 unit of X.
C)8 units of X.
D)20 units of X.
E)20 units of Y.

Question 40

Consider the production possibilities frontier in Figure 2.1.2,and assume that everything that is produced is also consumed.Which of the following statements is false?

A)Resources are not equally useful in all activities.
B)Points inside the frontier indicate unused or misallocated resources.
C)Starting at point A,an increase in the production of Y will shift the frontier outward.
D)The opportunity cost of producing Y increases as production of Y increases.
E)The opportunity cost of producing X increases as production of X increases.

Question 41

Use the figure below to answer the following questions.
Figure 2.1.3
Refer to the production possibilities frontier in Figure 2.1.3.The fact that less of X must be given up when moving from D to C than when moving from B to A indicates

A)decreasing opportunity cost.
B)increasing opportunity cost.
C)comparative advantage in the production of X.
D)the consequences of technological improvement.
E)unemployed resources at D.

Question 42

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-Refer to Table 2.1.1.As we increase the production of X,

A)the amount of Y that is given up for each additional unit of X decreases.
B)the output of Y increases.
C)the opportunity cost of each additional unit of X increases.
D)unemployment increases.
E)the amount of X increases at an increasing rate.

Question 43

The slope of the production possibilities frontier curve indicates

A)opportunity cost.
B)comparative advantage.
C)absolute advantage.
D)marginal benefit.
E)preferences.

Question 44

When producing at a point of production efficiency,________.

A)our choice of goods to produce can be either on or inside the production possibilities frontier
B)we can satisfy all our wants
C)the opportunity cost of producing goods other than those measured on the axes of the production possibilities frontier is zero
D)we face a tradeoff and incur an opportunity cost
E)resources are either unused or misallocated

Question 45

Use the figure below to answer the following question.
Figure 2.1.5
The graph in Figure 2.1.5 shows Sunland's PPF for food and sunscreen.Sunland faces ________ opportunity cost of food and ________ opportunity of sunscreen,which can be seen by the shape of the PPF.

A)an increasing;a decreasing
B)a constant;a constant
C)a decreasing;an increasing
D)an increasing;an increasing
E)a decreasing;a decreasing

Question 46

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-From the data in Table 2.1.1,the production of 7 units of X and 28 units of Y is

A)unattainable.
B)attainable but leaves some resources unused or misallocated or both.
C)on the PPF between points C and D.
D)on the PPF between points B and C.
E)outside the PPF.

Question 47

Use the table below to answer the following questions.
Table 2.1.2
Production Possibilities
$$\begin{array} { c c c } \text { Possibility } & \text { Kilograms of Butter } & \text { Guns } \\\hline A & 8 & 0 \\B & 6 & 1 \\C & 0 & 3 \\\hline\end{array}$$

-Refer to Table 2.1.2.According to this production possibilities frontier,

A)a combination of 6 kilograms of butter and 1 gun leaves some resources unused.
B)a combination of 0 butter and 4 guns is attainable.
C)resources are equally useful in all activities.
D)the opportunity cost of producing guns increases as more guns are produced.
E)the opportunity cost of producing guns decreases as more guns are produced.

Question 48

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-From the data in Table 2.1.1 we can infer that

A)the economy illustrated has a comparative advantage in the production of Y.
B)the economy illustrated has a comparative advantage in the production of X.
C)the opportunity cost of producing an additional unit of Y increases as the production of Y increases.
D)the opportunity cost of producing an additional unit of Y decreases as the production of Y increases.
E)none of the above.

Question 49

As we move down the bowed-out production possibilities frontier,opportunity cost

A)increases.
B)decreases.
C)remains constant.
D)initially decreases,then increases.
E)decreases but at an increasing rate.

Question 50

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-Refer to Table 2.1.1.The opportunity cost of increasing the production of X from 8 to 12 units is

A)4 units of X.
B)4 units of Y.
C)8 units of Y.
D)12 units of Y.
E)16 units of Y.

Question 51

Use the figure below to answer the following question.
Figure 2.1.6
Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food.Point A is ________ and point B is ________.This PPF ________ illustrate scarcity because ________.

A)unattainable;attainable;does;because the firm cannot attain the points outside the frontier
B)attainable;unattainable;does not;the firm can produce any quantity it wants if it is willing to pay a high enough price
C)unattainable;attainable;does not;the firm can produce any quantity it wants if it is willing to pay a high enough price
D)attainable;unattainable;does;the firm cannot produce points outside the frontier and as the firm moves along the PPF,it cannot produce more dog biscuits without producing less cat food
E)attainable;unattainable;does not;it is downward sloping

Question 52

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-Refer to Table 2.1.1.The opportunity cost of increasing the production of Y from 16 to 36 units is

A)4 units of X.
B)8 units of X.
C)12 units of X.
D)16 units of X.
E)20 units of Y.

Question 53

Use the table below to answer the following question.
Table 2.1.4
Consider the following production possibilities for A.Student for the typical week:
$$\begin{array} { c | c | c } \text { Possibility } & \text { Beer } & \text { Pizza } \\\hline a & 14 \text { cases } & 0 \\b & 12 \text { cases } & 6 \\c & 9 \text { cases } & 11 \\d & 5 \text { cases } & 14 \\e & 0 \text { cases } & 15\end{array}$$

-Refer to Table 2.1.4.Complete the following sentence.The production possibilities frontier in the table shows

A)increasing opportunity cost.
B)learning-by-doing.
C)constant opportunity cost.
D)under-utilization of resources.
E)decreasing opportunity cost.

Question 54

Use the figure below to answer the following questions.
Figure 2.1.4
Refer to the production possibilities frontier in Figure 2.1.4.Which point is unattainable?

A)A
B)B
C)C
D)D
E)E

Question 55

Use the table below to answer the following questions.
Table 2.1.2
Production Possibilities
$$\begin{array} { c c c } \text { Possibility } & \text { Kilograms of Butter } & \text { Guns } \\\hline A & 8 & 0 \\B & 6 & 1 \\C & 0 & 3 \\\hline\end{array}$$

-Refer to Table 2.1.2.In moving from combination B to combination C,the opportunity cost of producing one additional unit of guns is

A)2 kilograms of butter.
B)1/2 kilogram of butter.
C)6 kilograms of butter.
D)1/6 kilogram of butter.
E)3 kilograms of butter.

Question 56

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-The economy illustrated by the data in Table 2.1.1 exhibits

A)decreasing opportunity cost.
B)constant opportunity cost in the production of X.
C)constant opportunity cost in the production of Y.
D)increasing opportunity cost.
E)initially increasing,then decreasing opportunity cost.

Question 57

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-The diagram of the production possibilities frontier corresponding to the data in Table 2.1.1 would be

A)negatively sloped and linear.
B)negatively sloped and bowed inward.
C)negatively sloped and bowed outward.
D)positively sloped for X and negatively sloped for Y.
E)a horizontal line.

Question 58

Use the table below to answer the following questions.
Table 2.1.3
Production possibilities for a society that produces only two
goods - hockey sticks and maple leaves.
$$\begin{array} { c c c } \text { Possibility } & \text { Units of Hockey Sticks } & \text { Units of Maple Leaves } \\\hline A & 3 & 0 \\B & 2 & 3 \\C & 0 & 9 \\\hline\end{array}$$

-Refer to Table 2.1.3.In moving from combination C to combination B,the opportunity cost of producing one additional hockey stick is

A)2 maple leaves.
B)1/2 maple leaves.
C)6 maple leaves.
D)1/6 maple leaves.
E)3 maple leaves.

Question 59

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-Refer to Table 2.1.1.What does point C mean?

A)If 8 units of X are produced,then at least 28 units of Y can be produced.
B)If 8 units of X are produced,then at most 28 units of Y can be produced.
C)If 28 units of Y are produced,then more than 8 units of X can be produced.
D)If 8 units of X are produced,then only 36 units of Y can be produced.
E)There is unemployment at this point.

Question 60

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
$$\begin{array} { c c c } \hline \text { Point } & \text { Production of } X & \text { Production of } Y \\\hline A & 0 & 40 \\B & 4 & 36 \\C & 8 & 28 \\D & 12 & 16 \\E & 16 & 0\end{array}$$

-From the data in Table 2.1.1,the production of 10 units of X and 28 units of Y is

A)unattainable.
B)attainable but leaves some resources misallocated.
C)on the production possibilities frontier between points C and D.
D)inside the PPF.
E)possible if we reduce the amount of capital goods.

Question 61

Marginal benefit from a good or service is the benefit received from consuming ________.It is measured by the most that people are willing to pay for ________.

A)goods that you prefer;an additional unit of it
B)goods that you prefer;more of it
C)one more unit of it;an additional unit of it
D)one more unit of it;more of it
E)as much as is available;the total amount consumed

Question 62

A marginal benefit curve measures

A)comparative advantage.
B)willingness to pay.
C)absolute advantage.
D)opportunity cost.
E)expenditure.

Question 63

The marginal benefit curve for a good

A)shows the benefit a firm receives from producing one more unit of that good.
B)shows the most a consumer is willing to pay for one more unit of that good.
C)is upward-sloping.
D)is bowed outward.
E)none of the above.

Question 64

The quantity of shoes produced is measured along the x-axis of a bowed-outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis.As you move down towards the right along the production possibilities frontier,the marginal cost of

A)a pair of shoes decreases.
B)a pair of shoes increases.
C)a shirt remains constant.
D)a shirt increases or decreases but we don't know for sure.
E)a pair of shoes and a shirt is equal at the midpoint between the x-axis and the y-axis.

Question 65

The principle of decreasing marginal benefit implies that the ________.

A)additional benefit from obtaining one more unit of a good or service decreases as more of that good or service is consumed
B)additional benefit from obtaining one more unit of a good or service increases as more of that good or service is consumed
C)total benefit from obtaining more of a good or service decreases as more is consumed
D)total benefit from obtaining more of a good or service remains the same as more is consumed
E)additional benefit from producing one more unit of a good or service decreases as more of that good or service is produced

Question 66

Allocative efficiency refers to a situation where

A)opportunity costs are equal.
B)we cannot produce more of any one good without giving up some other good.
C)goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.
D)opportunity cost is zero.
E)none of the above.

Question 67

Jane produces only corn and cloth.If her preferences for corn and cloth change,then ________.

A)her PPF becomes steeper
B)her PPF becomes flatter
C)her PPF becomes straighter
D)the world PPF shifts outward
E)her PPF does not change

Question 68

Which of the following is true regarding marginal benefit? I.The marginal benefit curve shows the benefit firms receive by producing another
Unit of a good.
II.Marginal benefit increases as more and more of a good is consumed.
III.Marginal benefit is the maximum amount a person is willing to pay to
Obtain one more unit of a good.

A)I only
B)I and II
C)I and III
D)III only
E)I,II,and III

Question 69

As production of food increases,marginal benefit from food

A)increases and marginal cost increases.
B)increases and marginal cost decreases.
C)decreases and marginal cost increases.
D)decreases and marginal cost decreases.
E)decreases and marginal cost is zero.

Question 70

With allocative efficiency,for each good produced,

A)marginal benefit equals marginal cost.
B)marginal benefit is at its maximum.
C)marginal benefit exceeds marginal cost by as much as possible.
D)marginal cost exceeds marginal benefit by as much as possible.
E)marginal cost is at its minimum.

Question 71

The most anyone is willing to pay for another purse is $30.Currently the price of a purse is $40,and the cost of producing another purse is $50.The marginal benefit from a purse is ________.

A)$40
B)$50
C)$10
D)$20
E)$30

Question 72

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1,the curve labeled B shows

A)the bottles of pop that people are willing to forgo to get another bicycle.
B)the bicycles that people are willing to forgo to get another bottle of pop.
C)the bottles of pop that people must forgo to get another bicycle.
D)that the benefits of producing more bicycles is greater than the benefits of producing more pop.
E)that the benefits of producing more pop is greater than the benefits of producing more bicycles.

Question 73

To describe preferences,economists use the concept of

A)opportunity cost.
B)scarcity.
C)marginal benefit.
D)marginal cost.
E)none of the above.

Question 74

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1,when 4,000 bicycles are produced each month

A)the marginal benefit from another bicycle is greater than the marginal cost of another bicycle.
B)more bicycles must be produced to reach the efficient level of output.
C)fewer bicycles must be produced to reach the efficient level of output.
D)the economy is very efficient at this level of production of bicycles.
E)both A and B.

Question 75

Use the table below to answer the following questions.
Table 2.2.1
$$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Ethanol } \\\text { (barrels per day) }\end{array} & & \begin{array} { c } \text { Food crops } \\\text { (tonnes per day) }\end{array} \\\hline \mathbf { 7 0 } & \text { and } & 0 \\\hline \mathbf { 6 4 } & \text { and } & 1 \\\hline \mathbf { 5 4 } & \text { and } & 2 \\\hline \mathbf { 4 0 } & \text { and } & 3 \\\hline 22 & \text { and } & 4 \\\hline 0 & \text { and } & 5 \\\hline\end{array}$$

-Refer to Table 2.2.1.Marginal benefit from food crops

A)equals the marginal cost of food crops.
B)remains constant as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day.
C)cannot be calculated from the table.
D)increases as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day.
E)equals 70 barrels of ethanol.

Question 76

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1,the curve labelled A is the ________ curve and the curve labelled B is the ________ curve.

A)marginal cost;marginal benefit
B)marginal cost;trade
C)marginal benefit;trade
D)production possibilities;trade
E)marginal benefit;marginal cost

Question 77

Complete the following sentence.Marginal cost

A)is the opportunity cost of producing one more unit of a good or service.
B)is unrelated to the production possibilities frontier.
C)always equals marginal benefit.
D)remains constant.
E)is always greater then marginal benefit.

Question 78

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1,when 2,000 bicycles are produced each month

A)the marginal benefit from another bicycle is greater than the marginal cost of another bicycle.
B)more bicycles must be produced to reach the efficient level of output.
C)fewer bicycles must be produced to reach the efficient level of output.
D)the economy is efficient at this level of production of bicycles.
E)both A and B.

Question 79

Suppose the production possibilities frontier for skirts and pants is a straight line.As the production of skirts increases,the marginal benefit from skirts

A)increases and marginal cost is constant.
B)is constant and marginal cost decreases.
C)decreases and marginal cost increases.
D)decreases and marginal cost decreases.
E)decreases and marginal cost is constant.

Question 80

Complete the following sentence.As you consume more and more of a good,

A)marginal benefit increases.
B)marginal benefit decreases.
C)marginal benefit always equals marginal cost.
D)marginal benefit increases or decreases depending on where you are on the production possibilities frontier.
E)the price of the good falls.