ECON 201 ANSWERS
Refer to the table. A total output of 3 units of capitalgoods and 4 units of consumer goods
A. is irrelevant because the economyis capable of producing a larger total output.
B. will result in the maximum rate of growth available to this economy.
C. would involve an inefficient use of the economy's scarce resources.
D. is unobtainable in this economy.
103.
Answer the question on the basis of the data given in the following production possibilities table.
Production Possibilities (Alternatives)
A
B
C
D
E
F
Capital Goods
5
4
3
2
1
0
Consumer Goods
0
5
9
12
14
15
Refer to the table. Forthis economy to producea total output of 3 units of capitalgoods and 13 units of consumer goods, it must
A. expand its resources or improve its technology.
B. use its resources more efficiently than the data in the table now indicate.
C. allocate its available resources most efficiently among alternative uses.
D. achieve the full employment of availableresources.
104.
Answer the question on the basisof the data given in the followingproduction possibilities table.
Production Possibilities (Alternatives)
A
B
C
D
E
F
Capital Goods
5
4
3
2
1
0
Consumer Goods
0
5
9
12
14
15
Refer to the table. For these data, the law of increasing opportunity costs is reflected in the fact that
A. the amount of consumergoods that must be sacrificed to get more capitalgoods diminishes beyond a point.
B. larger and larger amounts of capital goods must be sacrificed to get additional units of consumergoods.
C. the production possibilities data would graph as a straight downsloping line.
D. the economy's resources are presumed to be scarce.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
105. When an economy is operating under conditions of full employment, the production of more of commodityA will mean the production of less of commodity B because
A. of the law of increasing opportunity costs.
B. economic wants are insatiable.
C. resources are limited.
D. resources are specialized and only imperfectly substitutable.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
106. Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that
A. the economy was not employing all of its resources before the policy change.
B. the economy's production possibilities curve has been shifted to the left as a result of the policy decision.
C. this economy's production possibilities curve is convex (bowed inward)to the origin.
D. the law of increasing opportunity costs does not apply in this society.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
107. The production possibilities curve
A. shows all of those levels of production that are consistent with a stable price level.
B. indicates that any combination of goods lying outside the curve is economically inefficient.
C. is a frontier betweenall combinations oftwo goods that can be producedand those combinations that cannot be produced.
D. shows all of those combinations oftwo goods that are most preferredby society.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
108. Any point inside the production possibilities curve indicates
A. the presence of technological change.
B. that resources are imperfectly substitutable among alternative uses.
C. the presence of inflationary pressures.
D. that more output could be producedwith the availableresources.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
109.
Refer to the diagram. Other things equal, this economy will shift its production possibilities curve outward the most if
A. the ratio of capital to consumer goods is minimized.
B. it chooses point C.
C. it chooses point B.
D. it chooses point A.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
110.
Refer to the diagram. This economy will experience unemployment if it produces at point
A. A.
B. B.
C. C.
D. D.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
111. Which of the followingis assumed in constructing a typical production possibilities curve?
A. The economy is using its resources inefficiently.
B. Resources are perfectly shiftable among alternative uses.
C. Production technology is fixed.
D. The economy is engaging in international trade.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
112. The typical production possibilities curve is
A. an upsloping line that is bowed out from the origin.
B. a downsloping line that is bowed in toward the origin.
C. a downsloping line that is bowed out from the origin.
D. a straight upsloping line.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
113. The slope of the typical production possibilities curve
A. is positive.
B. increases as one moves southeast along the curve.
C. is constant as one moves down the curve.
D. decreases as one moves southeast along the curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
114. Assume an economy is incurring unemployment. The effect of resolving this problemwill be to
A. move the level of actual output closer to the economy's production possibilities curve.
B. create a less equal distribution of income.
C. shift its production possibilities curve to the left.
D. shift its production possibilities curve to the right.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
115.
Duckistan Production Possibilities
A
B
C
D
E
Civilian Goods
20
18
14
8
0
Military Goods
0
1
2
3
4
Herbania Production Possibilities
A
B
C
D
E
Civilian Goods
40
36
26
14
0
Military Goods
0
1
2
3
4
Refer to the tables.Suppose that the amount and qualityof resources are the same in both countries. We can conclude that
A. Duckistan is technologically better than Herbania at producingmilitary goods.
B. Herbania is technologically better than Herbania at producing both military goods and civiliangoods.
C. the total opportunity cost of producing 4 units of military goods is the same in both countries.
D. Herbania is technologically superior to Duckistan in producing civilian goods.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
116.
Duckistan Production Possibilities
A
B
C
D
E
Civilian Goods
20
18
14
8
0
Military Goods
0
1
2
3
4
Herbania Production Possibilities
A
B
C
D
E
Civilian Goods
40
36
26
14
0
Military Goods
0
1
2
3
4
Refer to the tables. Suppose that technologyand the qualityof resources are the same in both countries. We can conclude that
A. Duckistan has more resources than Herbania.
B. Herbania has more resources than Duckistan.
C. Duckistan has greater opportunity costs than Herbania.
D. prices are twice as high in Herbaniaas in Duckistan.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
117.
Duckistan Production Possibilities
A
B
C
D
E
Civilian Goods
20
18
14
8
0
Military Goods
0
1
2
3
4
Herbania Production Possibilities
A
B
C
D
E
Civilian Goods
40
36
26
14
0
Military Goods
0
1
2
3
4
Refer to the tables.Opportunity costs of producingmilitary goods are
A. increasing in Duckistan but constant in Herbania.
B. constant in both Duckistan and Herbania.
C. larger in Duckistan than in Herbania.
D. smaller in Duckistan than Herbania.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
118.
Duckistan Production Possibilities
A
B
C
D
E
Civilian Goods
20
18
14
8
0
Military Goods
0
1
2
3
4
Herbania Production Possibilities
A
B
C
D
E
Civilian Goods
40
36
26
14
0
Military Goods
0
1
2
3
4
Refer to the tables. Opportunity costs are
A. constant in both Duckistan and Herbania.
B. larger in Duckistan than in Herbania.
C. increasing in both Duckistan and Herbania.
D. increasing in Duckistan and constant in Herbania.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
119.
Duckistan Production Possibilities
A
B
C
D
E
Civilian Goods
20
18
14
8
0
Military Goods
0
1
2
3
4
Herbania Production Possibilities
A
B
C
D
E
Civilian Goods
40
36
26
14
0
Military Goods
0
1
2
3
4
Refer to the tables.Suppose that Duckistan and Herbania are each producing14 units of civilian goods and 2 units of military goods. Then
A. Duckistan is fully employing its resources, but Herbaniais not.
B. both Duckistan and Herbania are fully employing their resources.
C. Herbania is fully employing its resources, but Duckistan is not.
D. neither Duckistan nor Herbania is fully employing its resources.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
120.
In the figure are two linear production possibilities curves for countries Alpha and Beta. We can conclude that
A. different value systems make it impossible to compare opportunity costs in the two countries.
B. the opportunity costof shelter is greater in Beta than it is in Alpha.
C. the opportunity costof food is greater in Alpha than it is in Beta.
D. the opportunity cost of shelter is greater in Alpha than it is in Beta.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
121. Which of the followingis not correct? A typical production possibilities curve
A. indicates how much of two products societycan produce.
B. revealshow much each additional unit of one product will cost in terms of the other product.
C. specifies how much of each product a society will want to produce.
D. indicates that to produce more of one product, a societymust forgo largerand larger amounts of the other product.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
122.
Refer to the diagram. This production possibilities curve is constructed so that
A. resources are presumed to be perfectly shiftable betweenbread and tractors.
B. the opportunity cost of bread diminishes as more bread is produced.
C. the opportunity cost of tractors increases as more bread is produced.
D. the opportunity costs of both bread and tractorsincrease as more of each is produced.
AACSB: Knowledge Application
Blooms: Apply Difficulty: 03 Hard
Learning Objective: 01-06 Apply production possibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Production Possibilities Model
123.
Refer to the diagram. Which of the following is a normative statement?
A. Point C is superior to point B because it is important to enhance the future of society.
B. If societyis initially at point C, it must sacrifice 6 units of breadto obtain one more unit of tractors.
C. If society produces 2 units of tractorsand 12 units of bread, it is not using its availableresources with maximumefficiency.
D. Other things equal, the combination of outputsrepresented by point D will result in more rapideconomic growth than will the combination represented by point C.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 01-03 Distinguish microeconomics from macroeconomics and positive economics from normativeeconomics. Learning Objective: 01-06 Apply productionpossibilities analysis, increasing opportunity costs, and economicgrowth.
Test Bank: I Topic: Microeconomics and Macroeconomics Topic: Production Possibilities Model
124.
Refer to the diagram. Which of the followingis a positive statement?
A. A point inside the production possibilities curve is superiorto a point on the curve because the former requires less work effort.
B. Because any society should stress economic growth as its major goal, point D is superior to point C.
C. Point B is preferable to point C because the ultimate goal of economic activity is to maximizeconsumption.
D. Given its resources and technology, this society is incapable of simultaneously producing 3 units of tractors and 15 units of bread.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard