Chapter2ReviewQuestions

Chapter2ReviewQuestions - ECN 211: Fall Semester, 2010...

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Fall Semester, 2010 Review Questions Chapter 2 ____ 1. Draw a production possibilities schedule in which X is measured horizontally and Y is measured vertically. At any point on this schedule, the opportunity cost of increasing X production by one unit is represented by: a. The distance to the schedule from the vertical axis. b. The distance to the schedule from the horizontal axis. c. the slope of the schedule at that particular point. d. none of the above. ____ 2. Carly decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied for the exam. Her opportunity cost of working the five hours is the: a. five hours she worked. b. $75 she earned. c. 10 points she lost on her exam because she was unable to study the extra five hours. d. time she could have spent watching television rather than working. e. guilt she feels about neglecting her economics studies. ____ 3. Which of the following would be most likely to cause the production possibilities drawn between the production of shirts and corn to shift outward over time? a. A current-year choice to produce more shirts and less corn. b. A current-year choice to produce more corn and fewer shirts. c. A reduction in the size of the economy’s labor force due to a widespread flu epidemic. d. A change in the technology used to produce both shirts and corn. ____ 4. The law of increasing opportunity costs is reflected by a production possibilities schedule that is: a. Drawn as a downward sloping straight line. b. Drawn as an upward-sloping straight line. c. Drawn as a schedule that has a bowed-out shape (concave to the origin of the graph) d. Drawn as a schedule that has a bowed-inward shape (convex to the origin of the graph) ____ 5. Suppose the endpoints of a linear production possibilities schedule are 50X and 200Y for the United States, and 60X and 60Y for Mexico. Suppose prior to specialization and trade each country produces 20X and operates on (not inside) its production possibilities schedule. By how much will total two-country (combined) output rise if specialization and trade occurs? a. zero, because there is no basis for specialization and trade. c. 20 X and 40 Y b. 30 X and 30Y d. None of the other answers are correct. ____ 6. Suppose an economy has two different types of labor--unskilled and skilled labor--and that a separate production possibilities schedule has been drawn for each type of labor between the production of two goods, X and Y. Suppose also that constant opportunity costs of production exist between the production of X and Y by each type of labor. The endpoints of a linear production possibilities schedule for unskilled labor are 40X and 40Y. The endpoints of the linear production possibilities schedule for skilled labor are 60X and 120Y. If 60 units of X are produced in this economy, what is the maximum amount of Y that can be produced? a.
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Chapter2ReviewQuestions - ECN 211: Fall Semester, 2010...

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