Introductory Concepts and the Production Possibilities Curve

Normative economics is based on a. Empirical and statistical theory *b. Value judgments about what ought to be c. Analysis about what is d. Microeconomics and not macroeconomics The economic problem is one of deciding how to make the best use of a. Virtually unlimited resources to satisfy virtually unlimited wants *b. Limited resources to satisfy virtually unlimited wants c. Limited resources to satisfy limited wants d. Unlimited resources to satisfy limited wants If a nations production possibilities schedule is a straight line, it would be due to *a. Resources being equally efficient in producing every good b. Resources being virtually unlimited c. Resources being costly d. Resources being not equally efficient in producing every good If a nations production possibilities schedule a straight line, it would be characterized by a. Decreasing opportunity costs *b. Constant opportunity costs c. Increasing opportunity costs d. Zero opportunity costs Positive economics is based on a. Value judgments about income levels in society b. Value judgments about employment levels in society *c. What is that is, facts and cause-and-effect relationships d. What ought to be According to the economic perspective, planners would choose to construct additional seats at a football stadium if the a. Marginal benefit of the additional seats equaled their marginal cost *b. Marginal benefit of the additional seats exceeded their marginal cost c. Marginal benefit of the additional seats was less than their marginal cost d. All of the above A production possibilities curve that is bowed outward illustrates *a. Increasing opportunity costs b. Constant opportunity costs c. Decreasing opportunity costs d. Zero opportunity costs The U.S. production possibilities curve will shift outward if a. Resources are used less efficiently b. Unemployment and underproduction are eliminated

*c. d.

Additional resources are discovered in the United States American tastes for all goods and services become stronger

Economic sanctions levied against a target country are intended to cause the a. Country to slide downward along its production possibilities curve b. Country to produce under conditions of increasing opportunity cost *c. Country to move to a point inside of its production possibilities curve d. Countrys production possibilities curve to shift outward As a subject matter, economics is most concerned with a. Making money in stocks, bonds, and real estate b. Understanding how to own and operate a business *c. The study of choice under conditions of scarcity d. The allocation of unlimited resources among limited human wants The subject of macroeconomics would be most concerned with how a. A tax on cigarettes affects consumptions by teenagers b. A ban of immigrant workers from Mexico affects U.S. apple growers c. Poor growing conditions in Canada would affect the price of wheat *d. National output and employment respond to changes in government spending Positive economics is concerned with all of the following questions except a. Why do engineers earn more than librarians? b. Do import tariffs protect the jobs of domestic workers? c. Will reducing income taxes cause households to work additional hours? *d. Should welfare payments be increased to help the poor? The factors of production include all of the following except *a. Money b. Entrepreneurship c. Capital d. Labor and Land The United States will move from a point on its production possibilities curve to a point inside the curve if there is a (an) *a. Increase in unemployment rate b. Rise in the level of price inflation c. Fall in the productivity of labor d. Decline in the birth rate If the slope of a straight line is -2, then the two variables in the graph are a. Directly related *b. Inversely related c. Cross related d. Not related In a graph showing study time and grades in an economic course a. Study time and grades are generally considered to be inversely related *b. Study time is the independent variable and grades are the dependent variable c. The slope of the graph is generally considered to be negative d. The graph generally appears as a downward-sloping straight line

Which of the following is not capital good? *a. A bank account b. A machine tool c. A factory building d. A farmers truck To an economist, which of the following represents investment? a. Purchase of a share of General Motors *b. Construction of an apartment building c. Purchase of a ten-year-old factory building d. Purchase of 180 acres of land e. Purchase of bonds issued by General Electric, Inc.

Figure 1

Figure 1 shows a production possibilities curve for a simple economy which produces only guns and butter. Which of the points labeled in the diagram is unattainable? a. A *d. D b. B e. E c. C Which of the points in Figure 1 corresponds to a situation in which the economys resources are underemployed? a. A d. D b. B e. E *c. C The production possibilities curve in Figure 1 is concave (bowed outward) because: a. Resources of production are scarce b. The more resources that are devoted to the production of guns, the less are available for the production of butter c. Capital is required for the production of guns but not for the production of butter *d. The economys resources of production are not all equally well adapted for the production of both guns and butter e. It takes time to shift resources from gun production to butter production and vice versa.

The next four questions are to be answered under the assumption that the economy is always operating on its production possibilities curve The larger the share of the economy resources that are allocated to the production of capital goods a. The smaller must be the labor force b. The larger must be the labor force *c. The smaller must be the current output of consumption of goods d. The more planned is the economy e. The larger must e the current output of consumption goods The more of the economys output which one person gets: *a. The less is available for the rest of the people in the economy b. The more is available for the rest of the people in the economy c. The more unequal must be the distribution of income within the economy d. The less unequal must be the distribution of income within the economy e. The larger must be the rate of capital formation The larger the share of the economys resources which are allocated to the production of agricultural commodities: a. The larger must be the economys current output of nonagricultural goods *b. The smaller must be the economys current output of nonagricultural goods c. The more rapidly the economys production frontier must shift outward d. The larger must be the economys labor force e. The less unequal must be the distribution of income within the economy The larger the share of the economys productive resources which are allocated to the production of capital goods: a*. The larger the production frontier of the economy is likely to shift outward over time b. The more slowly the production frontier of the economy is likely to shift outward over time c. The more rapidly the labor force of the economy must grow in order to utilize the capital goods. d. The less unequal must be the distribution of income within the economy e. The more unequal must be the distribution of income within the economy Suppose the average workweek is shortened from 40 to 30 hours. This by itself will tend to cause: a. A less unequal distribution of income b. An increase in GNP per capita c. An increase in the rate of investment d. An outward shift in the production possibilities curve *e. An inward shift in the production possibilities curve An outward shift in production possibilities curve could be the result of all of the following except: *a. A change in consumer preferences away from food and toward clothing b. An increase in the economys supplies of land, labor, and capital c. An improvement in the technology of food production d. An increase in the economys rate of capital formation e. An improvement in technology of clothing production