Question 1

Consider an economy that is producing inside its production possibilities curve.This economy could move closer toward its production possibilities curve by
A)distributing incomes more equally.
B)employing more of its available resources.
C)increasing the levels of wages and prices.
D)acquiring additional resources.

Accepted Answer

When an economy is producing inside its production possibilities curve, it indicates that there are available resources that are not being utilized to their full potential. By employing more of these available resources, the economy can move closer toward its production possibilities curve and increase its output levels. However, the other options may not necessarily lead to an increase in production levels. Distributing incomes more equally or increasing the levels of wages and prices may improve the overall well-being of individuals, but may not directly impact production. Acquiring additional resources may be a viable option, but may not always be feasible or cost-effective.

Question 2

Cuba is a command economy that suffered a decline in economic growth because of a cut in the aid provided by the former Soviet Union when the latter collapsed.As a consequence, Cuba
A)experienced an outward shift of its production possibilities curve.
B)experienced an inward shift of its production possibilities curve.
C)moved from one point to another along its existing production possibilities curve.
D)went to a point inside its production possibilities curve.

Accepted Answer

The decline in aid from the Soviet Union led to a reduction in resources and economic capacity, causing an inward shift of Cuba's production possibilities curve.

Question 3

The best output or the optimal production of the nation is
A)a combination of products at the midpoint of the production possibilities curve.
B)a combination of products at either of the two endpoints of the production possibilities curve.
C)determined by equalizing the marginal benefits and marginal costs of each product.
D)the production combination where the opportunity costs are minimized.

Accepted Answer

The answer of The best output or the optimal production...

Question 4

If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph,
A)the economy will always be at full employment.
B)more of one product can be produced without producing less of the other product.
C)the production possibilities curve would be a straight line.
D)the two products are of equal value to the economy.

Accepted Answer

If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph, it means that the opportunity cost of producing one product over the other is constant. This constant opportunity cost results in a linear production possibilities curve, which would be a straight line.

Question 5

A nation can increase its production possibilities by
A)shifting resources to produce more consumer goods and less investment goods.
B)shifting resources from private goods to public goods.
C)improving labor productivity.
D)eliminating unemployment.

Accepted Answer

Improving labor productivity increases the efficiency of production, allowing a nation to produce more goods and services with the same amount of resources, thus expanding its production possibilities.

Question 6

Imagine an ideal scenario where world peace prevails and all nations are led by peace-minded leaders.In such a world, the
A)MB for defense goods would shift left.
B)MB for defense goods would shift right.
C)MC for defense goods would shift left.
D)MC for defense goods would shift right.

Accepted Answer

In a world where world peace prevails, the need for defense goods and services would decrease since there would be less threat of conflict or war. As a result, the MB for defense goods would shift left, meaning the willingness to pay for these goods and services would decrease, and the demand for them would decrease as well.

Question 7

Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"?
A)faulty definition
B)post hoc fallacy
C)loaded terminology
D)confusing correlation and causation

Accepted Answer

The statement uses emotionally charged language ("price-gouging") to influence opinion, which is an example of loaded terminology.

Question 8

Economic growth may be represented by
A)a movement from one end of the production possibilities curve to the other.
B)an upward-sloping production possibilities curve.
C)a movement from a point inside to a point on the production possibilities curve.
D)a rightward shift of the production possibilities curve.

Accepted Answer

Economic growth is represented by an increase in the production possibilities of an economy. This is reflected in a rightward shift of the production possibilities curve, indicating that the economy can now produce more goods and services with the same amount of resources. Option A represents movement along the curve, which does not necessarily signify growth. Option B represents an increase in the efficiency of an economy, but not necessarily growth. Option C represents an inefficient use of resources, which does not result in growth either.

Question 9

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?
A)It would shift the curve to the right.
B)It would shift the curve to the left.
C)It would not shift the curve; it would be represented by a movement from a point inside the curve toward a point on the curve.
D)It would not shift the curve; it would be represented by a movement from a point on the curve to a point outside the curve.

Accepted Answer

The answer of A reduction in the level of unemployment...

Question 10

Economic growth is a result of
A)a reduction in the unemployment rate.
B)an increase in the opportunity costs of production.
C)a decrease in the demand for resources.
D)an increase in the supply of resources.

Accepted Answer

Economic growth is the increase in the production and consumption of goods and services over time. This increase is typically based on an increase in the supply of resources, such as labor, capital, and natural resources, which allow for greater production and consumption. Therefore, choice D is the best answer as an increase in the supply of resources leads to economic growth. Choices A, B, and C are incorrect as they do not directly relate to economic growth.

Question 11

Specialization and international trade allow a nation to
A)produce a combination of goods that is beyond (or outside) its production possibilities.
B)consume a combination of goods that is beyond (or outside) its production possibilities.
C)have an upward-sloping production possibilities curve.
D)consume a lot of goods without having to produce any output.

Accepted Answer

Specialization and international trade enable a nation to consume beyond its production possibilities by allowing it to trade for goods it does not produce, thus accessing a greater variety and quantity of goods than it could produce on its own.

Question 12

Which situation would most likely cause a nation's production possibilities curve to shift inward?
A)an increase in unemployment
B)an increase in the amount of imports
C)an increase in the number of skilled immigrant workers
D)the destruction caused by bombing and warfare in a losing military conflict

Accepted Answer

The destruction caused by bombing and warfare can reduce a nation's resources and productive capacity, leading to an inward shift of the production possibilities curve.

Question 13

When a nation is under-allocating resources to the production of a good, then the
A)marginal benefit is greater than the marginal cost of the good.
B)marginal benefit is less than the marginal cost of the good.
C)marginal cost of producing the good is decreasing.
D)marginal benefit of producing the good is increasing.

Accepted Answer

When a nation is under-allocating resources to the production of a good, it means that it is producing less than what is optimal. This can lead to a situation where the marginal benefit of producing the good is greater than its marginal cost. In other words, if more resources were allocated to the production of the good, the additional benefit (marginal benefit) would be higher than the additional cost (marginal cost). Therefore, the best choice is A.

Question 14

If the marginal benefit of a good is less than its marginal cost, then the nation should
A)produce more of that good.
B)Maintain the current level of production of that good.
C)reduce the marginal benefit of that good.
D)reduce the production of that good.

Accepted Answer

If the marginal benefit is less than the marginal cost, it means that producing more of that good will result in a net loss for the nation. Therefore, reducing the production of that good would be the best choice to avoid further losses.

Question 15

Which of the following statements is not correct?
A)An increase in a nation's labor supply will cause its potential output to increase.
B)Economic growth can be illustrated by an expansion of a nation's production possibilities curve.
C)An increase in the quantity of a nation's resources will cause economic growth, but an increase in the quality of resources will not.
D)New technologies or new ways of producing output can cause a nation's production possibilities curve to shift outward.

Accepted Answer

An increase in the quality of resources, such as better education and training of workers, can lead to economic growth by improving the efficiency and productivity of labor.

Question 16

Suppose there are two economies, Alpha and Beta, which have the same production possibilities curves.If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future
A)Alpha will experience greater economic growth than Beta.
B)Beta will experience greater economic growth than Alpha.
C)Alpha will not be able to achieve full employment or productive efficiency.
D)Beta will not be able to achieve full employment or productive efficiency.

Accepted Answer

By devoting more resources to capital goods, Beta is investing in future production capacity, which typically leads to greater economic growth over time compared to Alpha, which focuses more on consumer goods.

Question 17

If the production possibilities curve is a straight line, then
A)the opportunity cost of producing one good is zero.
B)the law of increasing opportunity costs does not apply.
C)the society can produce more of both goods simultaneously.
D)the society is capable of producing only one of the goods and not the other.

Accepted Answer

If the production possibilities curve is a straight line, it means that the resources are perfectly adaptable to produce both goods. This implies that the law of increasing opportunity costs does not apply since the opportunity cost of producing one good does not increase as the production of the other good increases.

Question 18

If a nation is operating at a point inside the production possibilities curve, it indicates that the nation could
A)increase its production of both goods X and Y simultaneously.
B)increase its production of one good, but only at the expense of reducing the other good.
C)not produce any more of one of the goods X or Y.
D)not employ any more resources, because all resources are now employed.

Accepted Answer

When a nation is operating inside the production possibilities curve, it indicates that the nation is not using all its resources efficiently. Therefore, it can increase its production of both goods X and Y simultaneously without any opportunity cost. This can be achieved by either improving technology, increasing efficiency, or reallocating resources.

Question 19

A nation that devotes more of its resources to the production of capital goods rather than consumer goods is likely to
A)cause its production possibilities curve to shift outward.
B)cause its production possibilities curve to shift inward.
C)increase the slope of its production possibilities curve.
D)decrease the slope of its production possibilities curve.

Accepted Answer

By devoting more resources to the production of capital goods, a nation is investing in its future productive capacity. This will lead to an increase in the availability of capital goods, which can be used to produce more consumer goods in the future. As a result, the production possibilities curve will shift outward, indicating an increase in the potential output of both capital goods and consumer goods.

Question 20

Suppose that a nation can only make two products: defense goods and civilian goods.In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of
A)civilian goods to decrease.
B)both civilian goods and defense goods to decrease.
C)defense goods to decrease.
D)defense goods to increase.

Accepted Answer

When the MB curve shifts leftward, it means that the marginal benefit of producing defense goods has decreased. Therefore, producing fewer defense goods becomes optimal. This will not directly affect the marginal benefit or cost of producing civilian goods, so their optimal quantity should remain constant. Therefore, the answer is C - defense goods will decrease.

Quiz 1: Limits, Alternatives, and Choices

Consider an economy that is producing inside its production possibilities curve.This economy could move closer toward its production possibilities curve by

Cuba is a command economy that suffered a decline in economic growth because of a cut in the aid provided by the former Soviet Union when the latter collapsed.As a consequence, Cuba

The best output or the optimal production of the nation is

If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph,

A nation can increase its production possibilities by

Imagine an ideal scenario where world peace prevails and all nations are led by peace-minded leaders.In such a world, the

Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"?

Economic growth may be represented by

A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

Economic growth is a result of

Specialization and international trade allow a nation to

Which situation would most likely cause a nation's production possibilities curve to shift inward?

When a nation is under-allocating resources to the production of a good, then the

If the marginal benefit of a good is less than its marginal cost, then the nation should

Which of the following statements is not correct?

Suppose there are two economies, Alpha and Beta, which have the same production possibilities curves.If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future

If the production possibilities curve is a straight line, then

If a nation is operating at a point inside the production possibilities curve, it indicates that the nation could

A nation that devotes more of its resources to the production of capital goods rather than consumer goods is likely to

Suppose that a nation can only make two products: defense goods and civilian goods.In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of