Page 1 ECON 2100 EXAM 1 Study Guide Chapters 2-3; 14 Exam 1 date: 09/15/2010 Name: __________________________ Date: _____________ 1. Technological improvements will: A) leave the production possibility frontier unchanged. B) shift the production possibility frontier inward. C) shift the production possibility frontier outward. D) necessarily lead to increased unemployment. Use the following to answer question 2: Figure: Strawberries and Submarines II 2. (Figure: Strawberries and Submarines II) Suppose the economy is now operating at point A . The first submarine, which is achieved at point B , would have an opportunity cost of ________ million tons of strawberries. A) 50 B) 150 C) 400 D) 950
Page 2 3. The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production. A) buy; sell B) buy; buy C) own; buy D) own; sell 4. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods: A) will increase, too. B) will not change. C) must decrease. D) may increase or decrease. 5. Trade can be beneficial to an economy because: A) it results in a more efficient use of the combined resources of some of the trading countries, even though it reduces efficiency in others. B) more goods and services can be obtained at lower opportunity cost. C) it prevents specialization in those activities in which countries have a comparative advantage. D) it prevents unemployment. 6. Economists may disagree about policies because: A) they may approach the issue using different sets of values. B) they may be using different economic models. C) they enjoy disagreeing with each other. D) they may approach the issue using different sets of values and because they may be using different economic models.
Page 3 Use the following to answer question 7: Figure: Strawberries and Submarines II 7. (Figure: Strawberries and Submarines II) Suppose the economy is now operating at point B . Achieving production at point F would require that the economy: A) achieve full employment and an efficient allocation of resources. B) reduce its production of strawberries. C) reduce its production of submarines. D) improve its technology or increase the amount of resources it has. Use the following to answer question 8: Figure: Tom's Production Possibilities
Page 4 8. (Figure: Tom's Production Possibilities) In the figure, which of the choices below represents the combination(s) of coconuts and fish that are feasible for Tom to produce at this time? A) A only B) A and B C) A, B, and C D) D only 9. The production possibility frontier illustrates that: A) the economy will automatically end up at full employment. B) an economy's productive capacity increases proportionally with its population.
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