Test Bank For Principles and Applications of Economics International Edition 6th Edition by Marc Lieberman

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Test Bank For Principles and Applications of Economics International Edition 6th Edition by Marc Lieberman

CHAPTER 2—SCARCITY, CHOICE, AND ECONOMIC SYSTEMS

MULTIPLE CHOICE

1.When opportunity costs rise as more of a good is consumed, the production possibilities frontier will be concave (bowed out) with respect to the origin.

a.	True
b.	False

ANS:APTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

2.By better utilizing existing resources, an economy can produce at a point outside of its current production possibilities frontier.

a.	True
b.	False

ANS:BPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Knowledge

3.The production possibilities frontier is useful for demonstrating both scarcity and productive inefficiency.

a.	True
b.	False

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:The Search for a Free LunchKEY:Bloom’s: Knowledge

4.An economy’s production possibilities frontier is fixed in the long run.

a.	True
b.	False

ANS:BPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Knowledge

5.If capital is not being used efficiently, an economy cannot be operating at a point along its production possibilities frontier.

a.	True
b.	False

ANS:APTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

                  Figure 2-1

6.Figure 2-1 illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. What is the opportunity cost for this person of moving from point a to point b?

a.	$5 of income per week
b.	$10 of income per week
c.	two hours of studying per week
d.	$10 per hour of studying per week
e.	$20 of income per week

ANS:BPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

7.Figure 2-1 illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. What is the opportunity cost for this person of moving from point b to point a?

a.	$5 of income per week
b.	$10 of income per week
c.	two hours of studying per week
d.	$10 per hour of studying per week
e.	$20 of income per week

ANS:CPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

8.Figure 2-1 illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. If this student does not study at all, how much income can they earn?

a.	$0
b.	$40
c.	$80
d.	$100
e.	$120

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

9.Production possibilities frontiers are typically concave (bowed out) from the origin because

a.	of the law of supply
b.	there is usually a one-for-one trade-off in resources used in production
c.	economies of scale enable firms to reduce the average costs of production as output rises
d.	the opportunity cost of a good rises as the quantity of the good produced increases
e.	resources are often left idle in the firm

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

10.Combinations of goods on the production possibilities frontier

a.	are unattainable without additional resources
b.	can be produced using currently available resources and technology
c.	reflect minimum normative value allocations
d.	will meet society’s needs but not its wants
e.	are attainable only through international trade

ANS:BPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Knowledge

11.Combinations of goods outside the production possibilities curve

a.	are unattainable given society’s technology and resources
b.	are combinations that have already been consumed
c.	go beyond basic necessities
d.	result from involuntary unemployment
e.	are the result of economic recessions

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

12.If the economy is producing a combination of goods inside its production possibilities frontier, then

a.	workers are on vacation
b.	a significant number of workers have little education
c.	some resources are being wasted
d.	technology must improve before output can increase
e.	the opportunity cost of producing more output is greater than the value of the additional output that could be produced

ANS:CPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

              Figure 2-2

13.Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. Between points F and G, the opportunity cost increasing wheat by two bushels equals

a.	0.25 million pounds of beef
b.	1.75 million pounds of beef
c.	0.125 pounds of beef
d.	8.0 pounds of beef
e.	0.5 pounds of beef

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

14.Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. Production at point H is

a.	unattainable given currently available technology and resources
b.	attainable by more fully employing already available resources
c.	attainable by using better technology which is already available
d.	attainable if beef production drops to zero
e.	attainable if all available resources are used to produce wheat

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

15.Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. What is assumed constant as the economy moves from point F to point G?

a.	both d and e
b.	the money supply
c.	consumer tastes and preferences
d.	the level of currently available technology
e.	the amount of available resources

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

16.Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. Figure 2-2 represents the production possibility frontier for beef and wheat. The opportunity cost of moving from point G to point F  equals

a.	0.25 million bushels of wheat
b.	1.75 million bushels of wheat
c.	0.125 bushels of wheat
d.	8 bushels of wheat
e.	2 bushels of wheat

ANS: E PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

17.The production possibilities frontier illustrates

a.	the combinations of goods that could be produced with resources and technology constant
b.	how technology influences opportunity costs
c.	the law of diminishing returns
d.	how price changes affect decision making of individuals
e.	the law of demand

ANS:APTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Knowledge

18.When there is an improvement in technology, holding all else constant,

a.	the production possibilities frontier will shift inward
b.	society faces larger opportunity costs from shifting productive resources from one use to another
c.	goods and services will increase in price
d.	the economy must have some idle resources
e.	the production possibilities frontier will shift outward

ANS:EPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: The Search for a Free Lunch KEY: Bloom’s: Comprehension

19.Which of the following could lead to an inward shift of the production possibilities frontier?

a.	an increase in the cost of one good
b.	an increase in the utilization of resources
c.	a rise in the level of technology
d.	a law is passed whereby a mandatory retirement age of 60 is imposed
e.	a decrease in the utilization of resources

ANS:DPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:The Search for a Free LunchKEY:Bloom’s: Application

20.One of the concepts that is illustrated by a downward sloping production possibilities frontier is that

a.	technology must change in order to produce more of a particular good
b.	to produce more of one good, some of the alternative goods must be given up
c.	opportunity cost generally declines as more of a good is produced
d.	specialization leads to gains in overall utility for society
e.	opportunity cost generally does not vary as more of a good is produced

ANS:BPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

                        Figure 2-3

21.Figure 2-3 shows the production possibilities frontier for a music processing plant that can produce both compact disks and cassettes. The opportunity cost of moving from point B to C is

a.	20 cassettes
b.	120 compact disks
c.	100 cassettes
d.	60 compact disks
e.	180 compact disks

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

22.Figure 2-3 shows the production possibilities frontier for a music processing plant that can produce both compact disks and cassettes. At which point would the plant be under-utilizing its resources?

a.	A
b.	B
c.	C
d.	D
e.	E

ANS:DPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

23.Which point in Figure 2-3 is not possible for this society to produce?

a.	A
b.	B
c.	C
d.	D
e.	E

ANS:EPTS:1DIF:Difficulty: Easy

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

24.Figure 2-3 shows the production possibilities frontier for a music processing plant that can produce both compact disks and cassettes. The opportunity cost of moving from point A to point E is

a.	zero
b.	30 cassettes
c.	180 compact disks
d.	cannot be determined because point E is unattainable under current technology and resources
e.	80 cassettes

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

25.When all resources used in production are not perfectly substitutable,

a.	specialization does not lead to greater production
b.	the economy or firm is producing at a point outside of its production possibilities frontier
c.	there will be constant opportunity costs
d.	the production possibilities frontier will be concave (bowed outward)
e.	the economy or firm will only produce one good in equilibrium

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

                        Figure 2-4

26.Which production possibilities frontier(s) in Figure 2-4 depict(s) a situation in which all resources are perfect substitutes in production?

a.	both C and E
b.	both D and E
c.	C
d.	D
e.	E

ANS: D PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

27.If an economy’s production possibilities frontier shifted to the right, this would illustrate

a.	increasing opportunity cost
b.	decreasing opportunity cost
c.	a fall in resource utilization
d.	economic growth
e.	a rise in resource utilization

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

Figure 2-5
Point	#Rockets	#Cruise Ships
A	20	0
B	18	6
C	14	10
D	8	12
E	0	13

28.Figure 2-5 shows five different combinations of rockets and cruise ships that a country could manufacture. Suppose it decided to produce 18 rockets and 12 cruise ships. Which of the following would be true?

a.	This combination could not be produced.
b.	The country will be at point B.
c.	The country will be at point C.
d.	The country will not be fully utilizing its resources.
e.	The country will be at the midpoint of points B and D.

ANS: A PTS: 1 DIF: Difficulty: Challenging

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

29.Figure 2-5 shows five different points along the production possibilities frontier for a country that produces rockets and cruise ships. If the country is currently operating at point C and decided to move to point B,

a.	the opportunity cost would be four rockets
b.	it could not do so, given the current state of technology and quantity of resources
c.	the country would have to forego producing six cruise ships
d.	the opportunity cost would be four cruise ships
e.	the opportunity cost would be six rockets

ANS:DPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP:Society’s Production ChoicesKEY:Bloom’s: Application

30.Figure 2-5 shows five different combinations of rockets and cruise ships that a country could manufacture.  The production possibilities frontier that is illustrated in Figure 2-5 exhibits

a.	decreasing opportunity cost
b.	increasing opportunity cost
c.	constant opportunity cost
d.	zero opportunity cost
e.	heightened opportunity cost

ANS:BPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: Society’s Production Choices KEY: Bloom’s: Comprehension

31.Two reasons why an economy might operate inside of its production possibilities frontier are

a.	productive efficiency and technological change
b.	depressions and inflation
c.	recessions and productive inefficiency
d.	opportunity costs and substitutability of resources used in production
e.	productive inefficiency and a decrease in the state of technology

ANS:CPTS:1DIF:Difficulty: Moderate

NAT: BUSPROG: Analytic STA: DISC: Scarcity, tradeoffs, and opportunity cost

TOP: The Search for a Free Lunch KEY: Bloom’s: Comprehension