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170.

Refer to the diagram. Technological advance that is useful in producing consumer goods but not in producing capital goods is shown by the shift of the production possibilities curve from AB to

A. CD.

B. EB.

C. AF.

D. GH.

171. The basic difference between consumer goods and capital goods is that

A. consumer goods are produced in the privatesector and capital goods are producedin the public sector.

B. an economythat commits a relatively large proportion of its resourcesto capital goods must accept a lower growth rate.

C. the production of capital goods is not subjectto the law of increasing opportunity costs.

D. consumer goods satisfy wants directly, whilecapital goods satisfy wants indirectly.

172. Which of the followingwill shift the production possibilities curve to the right?

A. an increase in the unemployment rate from 6 to 8 percent

B. a declinein the efficiency with which the presentlabor force is allocated

C. a decrease in the unemployment rate from 8 to 6 percent

D. a technological advance that allows farmers to producemore output from given inputs

173.

Other things equal, which of the followingwould shift an economy's production possibilities curve to the left?

A. the discovery of a low-cost means of generating and storing solar energy

B. the entrance of more women into the labor force

C. a law requiring mandatory retirement from the labor force at age 55

D. an increasein the proportion of total output that consists of capital or investment goods

174.

Refer to the diagram. The concave shape of each production possibilities curve indicatesthat

A. resources are perfectly substitutable.

B. wants are virtuallyunlimited.

C. pricesare constant.

D. resources are not equally suited for alternative uses.

175.

Refer to the diagram. The concept of opportunity cost is best represented by the

A. shift of the production possibilities curve from PP1 to PP2.

B. movefrom B on PP1 to E on PP2.

C. move from B on PP1 to C on PP1.

D. move from Dinside PP1to B on PP1.

176.

Refer to the diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of

PP3 rather than PP2?

A. A

B. B

C. C

D. D

177.

Refer to the diagram. An improvement in technology will

A. shift the production possibilities curve from PP1 to PP2.

B. shift the production possibilities curve from PP2 to PP1.

C. move the economy from A to C along PP1.

D. move the economy from A, B, or C on PP1 to D.

Refer to the diagram. Which one of the following would shift the production possibilities curve from PP1 to PP2?

A. an outbreak of the Zika virus leadingto an epidemic

B. immigration of skilled workers into the economy

C. an increasein consumer prices

D. a reductionin hourly wages

179. Which of the followingstatements, if any, is correctfor a nationthat is producingonly consumer and capital goods?

A. Other things equal, the more consumer goods a nationproduces, the greater will be its future growth rate.

B. Other things equal, the more capitalgoods a nation produces, the greaterwillbe its future growth rate.

C. There is no general relationship betweenthe current division of output between consumer and capital goods and the future growth rate.

D. None of these statements are correct.

180. All of the followingcould immediately or eventually lead to an inwardshift of a nation's production possibilities curve, except

A. emigration of skilledworkers to other nations.

B. a declinein the birthrate.

C. an increase in the average skill level of all occupational groups.

D. depletion and reduced availability of major energy resources.

181. A nation's production possibilities curve might shift to the left (inward)as a result of

A. technological advance.

B. increases in the size of the laborforce.

C. the depletion of its soil fertility due to overplantingand overgrazing.

D. investing in more capital goods.

182. Which of the followingwill enable a nation to obtain a combination of consumer goods and capital goods outside its production possibilities curve?

A. full employment

B. international specialization and trade

C. full production

D. productive efficiency

183. Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates

A. a rightward (outward) shift of the production possibilities curve.

B. increasing opportunity costs.

C. achieving points beyond the production possibilities curve throughinternational specialization and trade.

D. productive efficiency.

184. Through specialization and international trade, a nation

A. can attain some combination of goods lying outside its production possibilities curve.

B. can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve.

C. will only attain some combination of goods lying within its productionpossibilities curve.

D. will cause its production possibilities curve to shift leftward.

185. Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portionsof it have turned into desert. This suggests that

A. the production possibilities curves of such nations are more bowed out from the origin.

B. the production possibilities curves of such nations have shifted inward.

C. the production possibilities curves of such nations have shifted outward.

D. these nations are operating at some point outside of their production possibilities curves.

186. If all discrimination in the United States were eliminated, the economy would

A. have a less concave production possibilities curve.

B. produce at some point closer to its production possibilities curve.

C. be able to produce at some point outside of its production possibilities curve.

D. produce more consumer goods and fewer investment goods.

187. A country can achievesome combination of goods outside its production possibilities curve by

A. idlingsome of its resources.

B. specializing and engaging in international trade.

C. buying the debt (bonds and stocks) of foreign nations.

D. producing more capital goods and fewer consumer goods.

188. In recent years the economy of Japan has grown, despitethe fact that the population of Japan has declined. Which of the followingwould best explainJapan's economic growth despite having a smallerpopulation?

A. immigration of new workersinto Japan

B. advancements in technology that make labor more productive

C. reduced employment of capital because fewer workers are availableto use it

D. greater consumption of goods imported from other countries

189. (Consider This) Free products offered by firms

A. may or may not be free to societybut are never free to individuals.

B. may or may not be free to individuals but are never free to society.

C. are producedand distributed at no cost to society.

D. are usually items nobody wants.

190. (Consider This) The assertion by economists that "there is no free lunch"

A. is contradicted by the presenceof free goods offered by firms.

B. applies to goods that have prices, not to goods given away free by firms.

C. remains true even for goods given away free by firms.

D. applies to agricultural goods but not to manufactured goods.

191. (Consider This) The economic perspective used in customer decisionmaking at fast-food restaurants is reflected in

A. customers selecting the shortest line.

B. decisions for which marginal costs exceed marginal benefits.

C. all customer lines tending to be of different lengths.

D. irrational purchasing of high-fat-content food.

192. (Consider This) At fast-food restaurants

A. consumers enjoy complete and accurate information.

B. decisions are usually made by trial and error.

C. decisions entail comparisons of marginal costs and marginalbenefits.

D. benefits always exceed costs.

193. (Consider This) Consumers might leave a fast-food restaurant without being served because

A. they are misinformed about the marginal costand marginal benefits of the food being served.

B. they conclude that the marginal cost (monetary plus time costs) exceeds the marginalbenefit.

C. the environment is not conducive to a rational choice.

D. the lines waiting for service are not of equal length.

194. (Consider This) A direct cost of going to college is

A. tuition, whilean indirect cost (opportunity cost) is books and other supplies.

B. forgone income while in college,while an indirectcost (opportunity cost) is tuition.

C. tuition, while an indirectcost (opportunity cost) is forgone income while in college.

D. books and supplies, while an indirectcost (opportunity cost) is food and housing.

195. (Consider This) An exception to the advice "go to college,stay in college, and earn a degree" occurs when

A. tuition expenses are high and rising.

B. the opportunity cost of attending college is extraordinarily high.

C. the price of textbooks is high and rising.

D. the economy is growing rapidly and jobsare plentiful.

196.

(Consider This) Refer to the diagram. The direct economic impact of the destruction and loss of lives caused by the terrorist attacks of September11, 2001, is illustrated by the

A. shift of the production possibilities curve from CD to AB.

B. shift of the production possibilities curve from AB to CD.

C. move from x to y on production possibilities curve AB.

D. move from y to x on production possibilities curve AB.

197.

(Consider This) Refer to the diagram. The U.S. response to the events of September 11, 2001, is illustrated by the

A. shift of the production possibilities curve from CD to AB.

B. shift of the production possibilities curve from AB to CD.

C. move from x to y on production possibilities curve AB.

D. move from y to x on production possibilities curve AB.

AACSB: Knowledge Application

198.

(Consider This) Refer to the diagram. Suppose that point y represents the optimal combination of civiliangoods and defense goods. We can conclude that at y, the marginal benefit of defense goods

A. exceeds the marginal cost of defense goods.

B. equals the marginal cost of defense goods.

C. is zero.

D. is negative.

199. (Consider This) In response to the terrorist attacks of September 11, 2001, the government decidedto allocate more resourcestoward defense goods. The government's decision reflects their assessment that

A. the marginal benefits of additional defense goods outweighed the marginal cost.

B. the marginal costof additional defense goods outweighed the marginalbenefit.

C. there cannot be too many defense goods.

D. civilian goods are not worth producing.

200. (Last Word) The fallacyof composition states that

A. because economic systems are composed of so many diverse economic units, economic laws are necessarily inexact.

B. the anticipation of a particular event can affect the composition of that event when it occurs.

C. what is true for the individual must necessarily be true for the group.

D. because event A precedes event B, A is necessarily the cause of B.

201. (Last Word) The "after this, therefore because of this" fallacystates that

A. because event A precedes event B, A is necessarily the cause of B.

B. the very attempt to accomplish a certain objective may create conditions that prohibitthe achievement of that objective.

C. events may drastically alter plans; one's intentions and actual accomplishments may differ considerably.

D. generalizations that are accurate at the levelof microeconomics may be inaccurate at the level of macroeconomics.

202. (Last Word) The safest way for an individual to leave a burning theater is to run for the nearest exit; it is therefore also the best means of escapefor a large audience. This assertion illustrates the

A. "after this, therefore because of this" fallacy.

B. correlation fallacy.

C. fallacy of composition.

D. fallacy of limited decisions.

203. (Last Word) The post hoc, ergo propterhoc fallacy suggests that

A. positive statements are always followedby normative judgments.

B. positive statements can never beproven true or false.

C. if one acts on one's expectations, those expectations will alwaysbe fulfilled.

D. cause and effect can be determined merely by observingthe sequence of events.

204. (Last Word) Which of the followinghas to do with the problem of distinguishing cause and effect in economic reasoning?

A. the law of large numbers

B. the law of averages

C. the post hoc, ergo propterhoc fallacy

D. the fallacy of composition

205. (Last Word) Whichof the followingbest illustrates the post hoc, ergo propter hoc fallacy?

A. Because it was 90 degrees today, I worked up a sweat playing tennis.

B. I took the day off work to go to the beach, and that's why it rained.

C. Because it rained at the footballgame, my new sweater got wet.

D. Because I have studied diligently this semester, my grade averagehas improved.

206. (Last Word) The fallacy of composition is essentially the error of

A. omitting relevant variables in constructing a model.

B. reasoning from the general to the particular.

C. confusing cause and effect in economic relationships.

D. generalizing from the particular to the general.

207. (Last Word) The post hoc fallacy and the correlation problemboth relateto

A. the calculation of marginal costs and marginal benefits of any economic activity.

B. the issue of determining causation.

C. the frequent inability of households and businesses to behave rationally.

D. the trade-off problemassociated with competing goals.

208. (Last Word) If variables X and Y are positively correlated, this means that

A. X is the cause of Y.

B. Y is the cause of X.

C. causation necessarily exists, but we don't know whether X or Y is the cause.

D. causation may or may not exist between X and Y.

209. (Last Word) "The government deregulated the electricity industry in California, and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

A. fallacyof composition.

B. post hoc, ergo propter hoc fallacy.

C. use of loaded terminology.

D. law of averages.

210. (Last Word) A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of

A. loaded terminology.

B. the "after this, therefore because of this fallacy."

C. the fallacyof composition.

D. the economic perspective.

211. (Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of

A. the fallacyof composition.

B. the economic perspective.

C. loaded terminology.

D. marginal analysis.

212. (Last Word) A study found that the incidence of skin cancer increases along with the amount of time people work under fluorescent light, leading some people to conclude that fluorescent lighting is a cause of skin cancer.But further analysis found that people who work in offices, where fluorescent light is common, suffer more sunburn on theirvacations than other workers.The sunburns, not the fluorescent light, were the cause of the higher incidence of skin cancer. The original conclusion

illustrates

A. the fallacy of composition.

226. The process by which capital goods are accumulated is known as investment.

TRUE

227. The present choice of position on the production possibilities curve will not influence the future location of the curve.

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