Question 1

The marginal cost curve is:

Accepted Answer

A)  upsloping because of increasing marginal opportunity costs.
B)  upsloping because successive units of a specific product yield less and less extra utility.
C)  downsloping because of increasing marginal opportunity costs.
D)  downsloping because successive units of a specific product yield less and less extra utility.E) A) and B)
F) A) and C)

Question 2

Which of the following will shift the production possibilities curve to the right?

Accepted Answer

A)  an increase in the unemployment rate from 6 to 8 percent
B)  a decline in the efficiency with which the present labour force is allocated
C)  a decrease in the unemployment rate from 8 to 6 percent
D)  a technological advance which allows farmers to produce more output from given inputsE) A) and C)
F) B) and C)

Question 3

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact:

Accepted Answer

A)  is an example of irrational behaviour.
B)  implies that reading should be taught through phonics rather than the whole language method.
C)  contradicts the economic perspective.
D)  implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.E) B) and C)
F) All of the above

Question 4

Refer to the above diagram.If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

Accepted Answer

A)  will be 4 units of bicycles.
B)  will be 2 units of bicycles.
C)  will be zero because unemployed resources are available.
D)  of doing so cannot be determined from the information given.E) B) and C)
F) None of the above

Question 5

Refer to the above production possibilities curves.Given production possibilities curve (a), the combination of civilian and war goods indicated by point X is unattainable to this economy.

Accepted Answer

A) True 
 B)False

Question 6

Production possibilities tables for two countries, North Cantina and South Cantina: North Cantina Production possibilities (alternatives) 
  South Cantina Production possibilities (alternatives) 
 Refer to the above tables.Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods while South Cantina is producing 2 units of capital goods and 21 units of consumer goods.We can conclude that:

Accepted Answer

A)  North Cantina is fully and efficiently using its resources, but South Cantina is not.
B)  South Cantina is fully and efficiently using its resources, but North Cantina is not.
C)  neither South Cantina nor North Cantina are fully and efficiently using their resources.
D)  both South Cantina and North Cantina are fully and efficiently using their resources.E) A) and B)
F) A) and C)

Question 7

As used in economics, the notion of scarce resources means that:

Accepted Answer

A)  mineral deposits are only available in finite amounts.
B)  resources are not so plentiful that all individuals' material wants can be fulfilled.
C)  some resources are free while others have price tags on them.
D)  the quantities available of some resources exceed the demand for them.E) C) and D)
F) B) and C)

Question 8

A point inside the production possibilities curve is:

Accepted Answer

A)  attainable and the economy is efficient.
B)  attainable, but the economy is inefficient.
C)  unattainable, but the economy is inefficient.
D)  unattainable and the economy is efficient.E) A) and B)
F) A) and C)

Question 9

Refer to the above diagram.Which line(s)  show(s)  a negative relationship between x and y?

Accepted Answer

A)  A only
B)  both A and D
C)  A, B, and D
D)  both C and EE) A) and D)
F) A) and B)

Question 10

The law of increasing opportunity costs states that:

Accepted Answer

A)  if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so.
B)  the sum of the costs of producing a particular good cannot rise above the current market price of that good.
C)  if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount.
D)  if the prices of all the resources devoted to the production of goods increase, the cost of producing any particular good will increase at the same rate.E) B) and C)
F) A) and D)

Question 11

The study of economics exists because:

Accepted Answer

A)  government interferes with the efficient allocation of scarce resources.
B)  resources are scarce in relation to human material wants.
C)  the market system is an obstacle to the efficient use of plentiful resources to satisfy constrained wants.
D)  resources are overly abundant as compared to wants; thus, an allocation problem exists.E) C) and D)
F) All of the above

Question 12

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the:

Accepted Answer

A)  price of one product has decreased in relation to the other.
B)  prices of both products have decreased in the same proportion.
C)  marginal utilities derived from both products have decreased.
D)  consumer's money income has increased but the prices of both products have increased proportionately more.E) B) and C)
F) None of the above

Question 13

The attainable area for the budget line, per Figure 1.1, includes:

Accepted Answer

A)  the area below the line but not the budget line itself.
B)  the area below the budget line and the budget line.
C)  the area above the budget line but no the budget line itself.
D)  the area above the budget line and the budget line.E) A) and D)
F) B) and C)

Question 14

You should decide to go to a movie:

Accepted Answer

A)  if the marginal cost of the movie exceeds its marginal benefit.
B)  if the marginal benefit of the movie exceeds its marginal cost.
C)  if your income will allow you to buy a ticket
D)  because movies are inherently good products.E) A) and B)
F) A) and C)

Question 15

(The following economy produces two products.)  Production Possibilities Table
 Refer to the above table.In moving from possibility C to D, the cost of a unit of steel in terms of a unit of wheat is:

Accepted Answer

A)  10
B)  20
C)  25
D)  30E) B) and D)
F) A) and B)

Question 16

Refer to the following production possibilities curves.Curve (a)  is the current curve for the economy.Given production possibilities curve (a) , the combination of capital and consumer goods indicated by point L:

Accepted Answer

A)  would entail substantial unemployment.
B)  would entail an inefficient use of society's resources.
C)  is beyond the productive capacity of this society.
D)  suggests the productive capacity of the system is declining.E) None of the above
F) A) and C)

Question 17

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.Refer to the above information.Which of the following correctly expresses the indicated relationship as an equation?

Accepted Answer

A)  i = 20 - 4I.
B)  i = 20 -.4I.
C)  i = 24 -.4I.
D)  i = 20 - 10I.E) None of the above
F) A) and B)

Question 18

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

Accepted Answer

A)  the construction of more capital goods
B)  a decrease in discrimination based on race
C)  an increase in the number of skilled immigrant workers
D)  the destruction from bombing and warfare in a losing military conflictE) C) and D)
F) A) and C)

Question 19

The slope of a straight line can be determined by:

Accepted Answer

A)  comparing the absolute horizontal change to the absolute vertical change between two points on the line.
B)  comparing the absolute vertical change to the absolute horizontal change between two points on the line.
C)  taking the reciprocal of the vertical intercept.
D)  comparing the percentage vertical change to the percentage horizontal change between two points on the line.E) B) and D)
F) None of the above

Question 20

Refer to the above diagram.The vertical intercept:

Accepted Answer

A)  is 40.
B)  is 50.
C)  is 60.
D)  cannot be determined from the information given.E) A) and B)
F) A) and C)

Exam 1: B: Limits, Alternatives, and Choices

Refer to the above diagram.If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

Correct Answer
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Correct Answer
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(The following economy produces two products.) Production Possibilities Table Refer to the above table.In moving from possibility C to D, the cost of a unit of steel in terms of a unit of wheat is:

Correct Answer
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You should decide to go to a movie:

Correct Answer
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The attainable area for the budget line, per Figure 1.1, includes:

Correct Answer
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The study of economics exists because:

Correct Answer
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Which of the following will shift the production possibilities curve to the right?

Correct Answer
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The law of increasing opportunity costs states that:

Correct Answer
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The slope of a straight line can be determined by:

Correct Answer
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Refer to the above diagram.The vertical intercept:

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

Correct Answer
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As used in economics, the notion of scarce resources means that:

Correct Answer
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Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact:

Correct Answer
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Refer to the following production possibilities curves.Curve (a) is the current curve for the economy.Given production possibilities curve (a) , the combination of capital and consumer goods indicated by point L:

Correct Answer
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Correct Answer
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Refer to the above production possibilities curves.Given production possibilities curve (a), the combination of civilian and war goods indicated by point X is unattainable to this economy.

Correct Answer
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A point inside the production possibilities curve is:

Correct Answer
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A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the:

Correct Answer
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The marginal cost curve is:

Correct Answer
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Refer to the above diagram.Which line(s) show(s) a negative relationship between x and y?

Correct Answer
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Exam 1: B: Limits, Alternatives, and Choices

Refer to the above diagram.If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(The following economy produces two products.) Production Possibilities Table Refer to the above table.In moving from possibility C to D, the cost of a unit of steel in terms of a unit of wheat is:

Correct AnswerverifiedShow Answer

You should decide to go to a movie:

Correct AnswerverifiedShow Answer

The attainable area for the budget line, per Figure 1.1, includes:

Correct AnswerverifiedShow Answer

The study of economics exists because:

Correct AnswerverifiedShow Answer

Which of the following will shift the production possibilities curve to the right?

Correct AnswerverifiedShow Answer

The law of increasing opportunity costs states that:

Correct AnswerverifiedShow Answer

The slope of a straight line can be determined by:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The vertical intercept:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As used in economics, the notion of scarce resources means that:

Correct AnswerverifiedShow Answer

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.This fact:

Correct AnswerverifiedShow Answer

Refer to the following production possibilities curves.Curve (a) is the current curve for the economy.Given production possibilities curve (a) , the combination of capital and consumer goods indicated by point L:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the above production possibilities curves.Given production possibilities curve (a), the combination of civilian and war goods indicated by point X is unattainable to this economy.

Correct AnswerverifiedShow Answer

A point inside the production possibilities curve is:

Correct AnswerverifiedShow Answer

A leftward shift of a consumer's budget line to a position parallel with the original one could indicate that the:

Correct AnswerverifiedShow Answer

The marginal cost curve is:

Correct AnswerverifiedShow Answer

Refer to the above diagram.Which line(s) show(s) a negative relationship between x and y?

Correct AnswerverifiedShow Answer

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