Answer Bank 2 - 1) The production possibilities frontier...

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Unformatted text preview: 1) The production possibilities frontier illustrates the A) resources the economy possess, but not its level of technology. B) limits to people's wants. C) maximum combinations of goods and services that can be produced. D) goods and services that people want. 2) A recession, during which unemployment increases, will place an economy A) outside its production possibilities frontier. B) on the production possibilities curve but moved a little upwards. C) on the production possibilities curve but moved a little downwards. D) inside its production possibilities frontier. 3) The figure above shows the production possibilities frontier for a country. A combination of 4 million gallons of milk and 4 million gallons of ice cream is A) attainable and has less than full employment of resources. B) unattainable. C) attainable and has full employment of resources. D) More information is needed to determine if the point is attainable or not. 4) The figure above shows the production possibilities frontier for a country. A combination of 3 million gallons of milk and 3 million gallons of ice cream is A) attainable and has less than full employment of resources. B) unattainable. C) attainable and has full employment of resources. D) More information is needed to determine if the point is attainable or not. 5) The figure above shows the production possibilities frontier for a country. A combination of 2 million gallons of milk and 2 million gallons of ice cream is A) attainable and has full employment of resources. B) attainable and has less than full employment of resources. C) unattainable. D) More information is needed to determine if the point is attainable or not. 6) The figure above shows the production possibilities frontier for a country. In order for it to produce at point E, the A) country would need to acquire more resources and/or more advanced technology. B) country would need to use its resources more efficiently. C) production of SUVs would need to decrease. D) production of compact cars would need to decrease. 7) In order for Ireland to grow more potatoes, wool production must decrease. This situation is an example of A) a free lunch. B) opportunity benefit. C) a tradeoff. D) zero opportunity cost. 8) To calculate the opportunity cost, you divide the quantity of the forgone item by the A) price of the item obtained. B) decrease in the other item. C) price of the item forgone. D) increase in the other item obtained. 9) Why does a nation experience increasing opportunity cost? A) Resources are not equally efficient in producing different kinds of goods and services. B) As the nation moves from a production point within the PPF to one on the PPF, opportunity costs increase. C) As the nation moves from a production point within the PPF to another point also within the PPF, opportunity costs increase. D) When the amount of resources increases, the opportunity cost of all goods and services increases. 10) The fact of increasing opportunity cost when moving on the PPF means that A) when the government forces a movement from one point on the PPF to another point, no production is lost. B) to increase the production of one product requires smaller and smaller sacrifices of the other good. C) to decrease the production of one product requires smaller and smaller sacrifices of the other good. D) to increase the production of one product requires larger and larger sacrifices of the other good. 11) Carl's opportunity cost of creating a Web site is 40 pages of typing; Charles can produce one Web site for every 60 pages of typing. Hence the opportunity cost of typing one page for Carl is A) 1/60 of a Web site. B) 1 1/2 Web sites. C) one Web site. D) 1/40 of a Web site. 12) In the table above, how many jackets must Mary forgo for every dress she makes? A) 2/3 of jacket. B) 1 1/2 jackets. C) 3/4 of jacket. D) 12 jackets. 13) In the table above, how many jackets must Mark forgo for every dress he makes? A) 16 jackets. B) 2/3 of jacket. C) 1 1/2 jackets. D) 1 jacket. 14) A country has a comparative advantage in the production of a good if it can A) produce more of the good than another country. B) tradeoff producing the good for another good. C) produce the good at the lowest opportunity cost. D) produce more of the good most efficiently. 15) For country Gamma the opportunity cost for producing 1 computer is 10 tons of steel. For country Beta the opportunity cost for producing 1 computer is 6 tons of steel. Which country has the comparative advantage in the production of steel? A) Gamma B) Beta C) Both have the comparative advantage in the production of steel. D) Neither country has the comparative advantage in the production of steel. uD @ X r H ê ) 6 X r H ê q ) ) ) ) X rHq X r H ê q ) ) ) ) ) ) ) ) X r H ê u D @ )6 X r H ê q ) ) ) ) X rHq X r H ê q ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 16) In the table above, Jack's opportunity cost for 1 pound of food is _____ and his opportunity cost for one pound of clothing is _____. A) 1/2 pound of clothing, 2 pounds of food B) 2 pounds of clothing; 2 pounds of food C) 1/3 pound of clothing; 3 pounds of food D) 1 pound of clothing; 4 pounds of food 17) In the table above, Jill's opportunity cost for 1 pound of food is _____ and her opportunity cost for one pound of clothing is _____. A) 1/3 pound of clothing; 3 pounds of food B) 1/2 pound of clothing; 2 pounds of food C) 1 pound of clothing; 4 pounds of food D) 2 pounds of clothing; 2 pounds of food 18) In the table above, Jack's comparative advantage is producing _____ and Jill's comparative advantage is producing _____. A) food; clothing B) nothing; clothing and food C) clothing; food D) clothing and food; nothing 19) What is gained when people engage in specialization and trade? A) Specialization and trade allow people to consume at a point on their production possibilities frontiers. B) Specialization and trade allow people to consume outside their individual production possibilities frontiers. C) Specialization and trade allow people to consume inside their production possibilities frontiers. D) There are no gains from specialization and trade. 20) If a nation has an absolute advantage in producing a good, then it A) will have no need to trade with other nations. B) will always specialize in that good. C) will have a comparative advantage in it, too. D) might or might not have a comparative advantage in producing that good. 1) C 2) D 3) B 4) C 5) B 6) A 7) C 8) D 9) A 10) D 11) D 12) B 13) B 14) C 15) A 16) A 17) A 18) C 19) B 20) D ...
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