MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answer the question. 1) Scarcity A) stems from the incompatibility between limited resources and unlimited wants. B) can be overcome by discovering new resources. C) can be eliminated by rationing products. D) is a bigger problem in market economies than in socialist economies. 2) The principle of opportunity cost is that A) in a market economy, taking advantage of profitable opportunities involves some money cost. B) the economic cost of using a factor of production is the alternative use of that factor that is given up. C) taking advantage of investment opportunities involves costs. D) the cost of production varies depending on the opportunity for technological application. combinations of two products that may be produced in a 3) The production possibility frontier shows the particular time period with available resources. A) minimum attainable B) maximum attainable C) only D) equitable 4) The production possibility frontier model shows that A) if consumers decide to buy more of a product, its price will increase. B) a market economy is more efficient in producing goods and services than a centrally planned economy. C) economic growth can only be achieved by free market economies. D) if all resources are fully and efficiently utilised, more of one good can be produced only by producing less of another good. 5) The production possibility frontier model assumes which of the following? A) Labour, capital, land and natural resources are unlimited in quantity. B) The economy produces only two products. C) Any level of the two products that the economy produces is currently possible. D) The level of technology is variable. 6) The attainable production points on a production possibility curve are A) the horizontal and vertical intercepts. B) the points along the production possibility frontier. C) the points outside the area enclosed by the production possibility frontier. D) the points along and inside the production possibility frontier. 7) The points outside the production possibility frontier are A) efficient. B) attainable C) inefficient D) unattainable. Fin 2-1 Refur te 2-1. Pont Ais A) technically efficient 1) natt le with current inefficient in that not all e s are being used Dy the equilibrium output combination 9) Refer to w 2-1. Point Bis A) technically efficient ) unattainable with current resources inefficient in that not all suces are being used Dy the equilibrium itput combination 10) Refer to Figure 2-1. Point Cis A) technically efficient B) unattainable with current resources inefficient in that not all resources are being used. D) the equilibrium itput combination the frontier is productively inefficient 11) In a production possibility frontier model, a point A) along B) inside Coutside D) at either intercept of 12) Bella can produce either a combination of 60 silk roses and silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces roses and sikkeaves, what is the opportunity cost of producing an additional 10 silk A) 25 leaves B) 10 silk leaves 2 sl leaves will leaves Answc D 13) can produce the action of bow tiend o conto bow and 15 Whenow produces bow ties and 15 neckties what is the opportunity cost of producing an additional 15 neckties? A) 2 bowie B) 15 wts 20 bow ties D) 35 bow ties Figure 2-2 20) Refer to Figure 2-2. Steve Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2-2 represents his production possibility frontier? A) Graph A B) Graph B C) Graph D) Either Graph Bor Graph C 21) Refer to Figure 2-2. Steve Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-2 represents his production possibility frontier? A) Graph A B) Graph B C) Graph C D) Either Graph B or Graph C Table 2-1 Production choices for Tomaso's Trattoria Quantity of Quantity of Pizzas Calzones Choice Produced Produced 48 0 36 15 30 12 45 60 22) Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear A) along Tomaso's production possibility frontier. B) inside Tomaso's production possibility frontier C) outside Tomaso's production possibility frontier. D) at the horizontal intercept of Tomaso's production possibility frontier. 23) Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones would appear A) along Tomaso's production possibility frontier. B) inside Tomaso's production possibility frontier. C) outside Tomaso's production possibility frontier. D) at the horizontal intercept of Tomaso's production possibility frontier. 24) Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 15 calzones would appear A) along Tomaso's production possibility frontier, B) inside Tomaso's production possibility frontier C) outside Tomaso's production possibility frontier. D) at the horizontal intercept of Tomaso's production possibility frontier 25) Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. Tomaso faces opportunity costs in the production of pizzas and calzones A) increasing B) decreasing C) constant D) negative Table 2-2 Production choices for Billie's Bedroom Shop Quantity of Quantity of Pillows Blankets Choice Produced Produced 0 27 14 21 36 26) Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 9 pillows and 21 blankets would appear A) along Billie's production possibility frontier B) inside Billie's production possibility frontier. C) outside Billie's production possibility frontier. D) at the vertical intercept of Billie's production possibility frontier 27) Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 9 pillows and 14 blankets would appear A) along Billie's production possibility frontier B) inside Billie's production possibility frontier. C) outside Billie's production possibility frontier D) at the vertical intercept of Billie's production possibility frontier. 28) Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 5 pillows and 21 blankets would appear A) along Billie's production possibility frontier B) inside Billie's production possibility frontier. C) outside Billie's production possibility frontier D) at the vertical intercept of Billie's production possibility frontier 29) Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. Billie faces opportunity costs in the production of pillows and blankets. A) increasing B) constant C) decreasing D) negative C) is the result of advancements in food production technology. D) is the result of advancements in plastic production technology. 37) Refer to Figure 2-3. Consider the following events: a. an increase in the unemployment rate b. a decrease in a nation's money supply c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Y to W? A) a, b and c B) a and b only C) a and c only D) c only 38) Refer to Figure 2-3. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents economic growth? A) a, b and c B) b and conly C) a only D) b only 39) Refer to Figure 2-3. Consider the following events: a. a decrease in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from V to W? A) a only B) a and b only C)b and conly D) a, b and c 40) Refer to Figure 2-3. Consider the following events: a. a reduction in the patent protection period to no more than 2 years b. a war that destroys a substantial portion of a nation's capital stock c. the lack of a secure and enforceable property rights system Which of the events listed above could cause a movement from W to V? A) a only B) a and b only C) a and c only D) a, b and c