Econ1B03-qCh2 - 1Chapter 2 Economic Activities: Producing...

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1 Chapter 2 Economic Activities: Producing and Trading 1. Points outside (or beyond) the PPF are a. attainable. b. unattainable. c. efficient. d. inefficient. ANS: b 2. Which of the following statements is true? a. In a world of efficiently used scarce resources, more of one good necessarily means less of some other good. b. The law of increasing opportunity costs assumes that all people have the same ability to produce goods. c. Efficiency implies that it is impossible to get more of one good without getting less of another. d. Even if a country has unemployed resources, it can still be operating on its production possibilities frontier (PPF). e. a and c ANS: e 3. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country’s a. production possibilities frontier (PPF) after the war is probably farther away from the origin than its PPF before the war. b. PPF after the war is probably closer to the origin than its PPF before the war. c. PPF after the war is probably the same PPF as before the war. d. ability to produce goods and services has increased. e. b and d ANS: b 4. The economy moves from point A, where it produces 100X and 200Y, to point B, where it produces 200X and 150Y. It follows that a. point A is an inefficient point. b. point A may be an inefficient point. c. point A may be an efficient point. d. point B is an efficient point. e. b and c ANS: e 5. Both country 1 and country 2 are located on their respective PPF, but country 1 produces twice the output that country 2 produces. It follows that a. country 1’s PPF lies further to the right than country 2’s PPF. b. country 1 has a smaller population than country 2. c. country 1 has a bigger population than country 2. d. country 1 practices capitalism and country 2 practices socialism. e. none of the above ANS: a 31
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32 Chapter 2 6. Jorge is willing and able to pay up to $20 for an authentic autograph of Michael Jordan that he buys for $18. Melissa requires a minimum price of $15 before she will sell the autograph to Jorge. The consumers’ surplus is ____________ and the producers’ surplus is ________ in this situation. a. $3; $2 b. $2; $3 c. $20; $15 d. There is not enough information to answer this question. ANS: b 7. When Claudia trades $100 for good X, economists assume that she is a. trading something of less value to her for something of more value to her. b. trading something of more value to her for something of less value to her. c. trading something that gives her less utility for something that gives her more utility. d. a and c e. none of the above ANS: d 8. Before an exchange is made, a person is said to be in the a. ex ante position b. ex post position c. ceteris paribus position d. current position e. ex calibre position ANS: a 9. If the price a buyer pays for a good is $40 and the maximum price she would be willing and able to pay is $43, then __________ is __________.
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Econ1B03-qCh2 - 1Chapter 2 Economic Activities: Producing...

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