Refer to the information provided in Figure 2.5 below to answer the questions that follow.
1) production is the process by which
a) products are used by consumers.
b) resources are transformed into useful forms.
c) products are converted into capital.
d) resources are allocated and distributed.
2) Which of the following is a resource as the term is used by economists?
d) all of the above
3) Economists refer to things that have already been produced that are in turn used to produce other goods and services as
4) According to the theory of ________, specialization and free trade will benefit all trade partners, even when some are absolutely
more efficient producers than others.
a) comparative advantage
b) absolute advantage
c) social equity
5) Specialization and trade exploit differences in productivity across workers and
a) only benefit the exporter.
b) only benefit the importer
c) make everyone better off.
d) make everyone worse off
6) If a vintner has a comparative advantage in producing wine
a) he can produce more wine using the same resources than other vintners.
b) wine is the only product he can produce.
c) he can produce wine at a lower opportunity cost than other vintners.
d) he also has an absolute advantage in producing wine.
7) Which of the following is an act of economic “investment”?
a) The state legislature authorizes the sale of a state park
b) An entrepreneur buys 5000 shares of stock at $5 a share and then sells the stock at a profit for $60 a share.
c) A manufacturer purchases a new machinery system for his plant.
d) A teacher deposits $500 in a retirement account.
8) In economics, the creation of capital is referred to as
b) comparative advantage
9) When an economy is producing inside its production possibility frontier
a) production inefficiency occurs
b) only technological advances will allow it to increase production
c) it is efficient so long as it is producing what people want.
d) it must overcompensate by producing outside the curve to achieve efficiency.
10) According to Figure 2.4, Point A necessarily represents
a) an unattainable production point
b) only hybrid cars being produced
c) the economy’s optimal production point.
d) what society wants.
11) According to Figure 2.4, Point F
a) is efficient and attainable
b) represents underallocation of resources
c) represents what the people want.
d) cannot be produced with the current state of technology
12) According to Figure 2.4, Point E necessarily represents
a) an impossible production point
b) technological advancement
c) overallocation of resources
d) only motorcycles being produced
13) According to Figure 2.4, an increase in unemployment may be represented by the movement from
a) B to A.
b) B to D
c) C to D.
d) A to C
14) According to Figure 2.4, as the economy moves from Point B to Point D, the opportunity cost of motorcycles, measured in terms
of hybrid cars
a) remains constant
d) initially increases, then decreases
15) According to Figure 2.4, as the economy moves from Point D to Point B, the opportunity cost of hybrid cars, measured in terms
a) remains constant.
d) initially increases, then decreases
16) Economic growth will most likely occur when
a) a society acquires new resources
b) a society decides to produce less using existing resources.
c) the society begins to produce the combination of goods society wants most.
d) technology remains unchanged but unemployment increases
17) In a command economy, ________ establishes what will be produced and when, sets production goals, and makes rules for
a) individuals and households
b) only privately owned firms
c) a centralized authority
d) individuals, households and privately owned firms
18) In a laissez-faire economy
a) individual people and firms pursue their own self-interest.
b) the government decided how to distribute goods and services.
c) a centralized authority establishes what will be produced.
d) consumers do not exercise choice
19) Which of the following statements is true for a command economy?
a) Consumers have no choice concerning what they buy.
b) Manufacturers decide what is produced
c) The amount of a good supplied always equals the amount of the good demanded
d) The state decides how to distribute what is produced.
20) The idea that consumers determine what is produced in the economy through their demands is known as
a) a laissez-faire economy.
b) a command economy.
c) consumer sovereignty
d) free enterprise.
21) The freedom of individuals to start and operate private business in search of profits is known as
b) free enterprise
c) centralized decision making
d) consumer sovereignty
22) In a laissez-faire economy, what provides individuals the information needed to make decisions?
23) Refer to Figure 2.5. The economy is currently at Point B. The opportunity cost of moving from Point B to Point A is the
a) 40 plasma TVs that must be forgone to produce 120 additional LCD TVs.
b) 20 plasma TVs that must be forgone to produce 30 additional LCD TVs.
c) 30 LCD TVs that must be forgone to produce 40 additional plasma TVs.
d) 120 LCD TVs that must be forgone to produce 20 additional plasma TVs.
24) Refer to Figure 2.5. For this economy to move from Point C to Point B, ________ LCD TVs could be produced when the
production of plasma TVs is reduced by 20.
a) exactly 30
b) fewer than 30
c) more than 30
d) exactly 60