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Assignment 2

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1. What economic concept is illustrated by the saying "You can't have your cake and eat it too."?

a) Human capital
b) Opportunity cost
c) Normative statements
d) Marginal unit
e) Entrepreneurial ability

2. The tradeoffs facing a society can be illustrated in a graph known as

a) the production cost curve.
b) the production possibilities curve.
c) the production cost forecast curve.
d) the production cost model.
e) the production operations curve.


3. A point lying inside the PPC

a) represents an increase in resources.
b) indicates that resources are not being fully or efficiently used.
c) illustrates resources being used to their fullest potential.
d) is not an attainable combination.
e) requires more resources than are presently available.

butter production
4. Norway has a comparative advantage in ______ and an absolute advantage in ________.

a) ham; ham
b) ham; nothing
c) nothing; butter
d) ham; butter
e) butter and ham; butter

5. Which of the following will not cause a rightward shift in a nation's production possibilities curve?

a) An increase in the general level of education
b) An increase in technology
c) An increase in the quantity of the nation's resources
d) An increase in the labor force
e) A reduction in unemployment

cookie production
6. In the table above, if trade were to occur, what would be the most Ohio would be willing to pay for 1 chili?

a) 6 cookies
b) ⅛ of a cookie
c) of a cookie
d) 4 cookies
e) 8 cookies

7. Which of the following will bring about an inward shift of a PPC ?

a) An increase in unemployment
b) An increase in the working-age population
c) An increase in the amount of capital available
d) A decrease in the availability of natural resources
e) A decrease in the amount of resource employment

specialization chart
8. Specialization and trade ensure which of the following?

a) That we are better off than doing everything ourselves.
b) Unemployment rates will be higher.
c) Trade gains are unimportant in the long run.
d) Resources will be used inefficiently.
e) That we are worse off than doing everything ourselves.

possibilities schedule
9. According to the production possibilities schedule in the table above, which of the following statements is true?

a) Moving from choice 2 to choice 3, the opportunity cost of 20 more B is 20 units of A.
b) Moving from choice 3 to choice 4, the opportunity cost of 20 more B is 30 units of A.
c) There are increasing opportunity costs associated with getting more B.
d) Moving from choice 1 to choice 2, the opportunity cost of 20 more B is 10 units of A.
e) All of these

corn production
10. In the above figure, if the economy only produces corn and planes and there is a 20% drop in the work force, graph____ describes the change in the economy's PPC .

a) A
b) B
c) C
d) A and B
e) A and C

production curve
11. Refer to the figure above. The optimal point for the economy is

a) D
b) B
c) E
d) C
e) Cannot determine from the information given.

12. Jane wins $100,000 in the lottery and immediately uses her winnings to open up a donut shop. Her direct costs are $50,000 and the remaining money she puts in the 10 percent savings account. Alternatively, Jane could have placed her lottery winnings in a savings account earning 10 percent annual interest. Jane's total cost is

a) $55,000.
b) $50,000.
c) $45,000.
d) $60,000.
e) $160,000.

13. Specialization occurs because

a) doing so allows people to engage in those activities that require them to give up the smallest amount of other things.
b) without government intervention people do not know where to devote their energies.
c) people are better educated today than they were in previous generations.
d) the most realistic shape of a production possibilities curve is a straight line.
e) people are generally lazy.

14. Which statement concerning opportunity costs is false ?

a) Every choice involves opportunity costs.
b) Opportunity costs can always be expressed in money terms.
c) Opportunity costs are the highest valued alternatives that must be forgone when a choice is made.
d) Economists refer to the forgone benefits of the next-best alternative as opportunity costs.
e) The full cost of an activity includes the opportunity costs.

possibilities schedule
15. In the table above, if trade were to occur, which of the following is true?

a) Country X should export sugar and coffee to country Y.
b) Country X should export sugar to country Y, and country Y should export coffee to country X.
c) Country Y should export sugar and coffee to country X.
d) Country X should export coffee to country Y, and country Y should export sugar to country X.
e) Country X should export coffee to country Y, but the two countries should not exchange sugar.

production curve
16. The production possibilities curve in the figure above indicates that

a) more resources exist than the economy can efficiently use.
b) it is possible to produce more of one good without sacrificing some of the other good only if production is occurring at a point inside the PPC .
c) good X is an input in the production of good Y .
d) producing an additional unit of good X requires producing an additional unit of good Y.
e) the economy is experiencing decreasing marginal opportunity costs.

17. If the resources within a nation are not being fully or efficiently utilized, it means

a) that nation is operating at a point outside its production possibilities curve.
b) the government of that nation should seize ownership of the resources in order to gain the necessary efficiencies.
c) that nation is operating at a point inside its production possibilities curve.
d) that nation is operating at a point along its production possibilities curve.
e) that nation is probably technologically advanced.

18. What accounts for specialization?

a) People do not specialize.
b) People specialize in the activity that they enjoy the most, no matter what the salary is.
c) People specialize in the activity that pays the highest wage.
d) People specialize where opportunity costs are at a maximum.
e) People specialize where their opportunity costs are lowest.

production curve
19. If society begins by producing 3 units of X and 4 units of Y, and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then

a) resources were being fully utilized at 3 units of X and 4 units of Y.
b) society has moved along the PPC .
c) 3 units of X and 4 units of Y are a combination best represented by a point outside the PPC .
d) 3 units of X and 4 units of Y are a combination best represented by a point inside the PPC .
e) resources were being efficiently utilized at 3 units of X and 4 units

production curve
20. Consider the PPC in the figure above. Point K indicates

a) that the production of goods has expanded.
b) that the production of goods has contracted.
c) that the production of services has contracted.
d) that the production of services has expanded.
e) a point that is currently unattainable for this economy.

 

Essay Questions

1. Why must you understand the Constitution to understand the U.S. economic structure? Explain a few of the provisions of the Constitution that benefit the economy.

2. The Constitution guarantees to us property rights, individual liberties, and the rule of law. Why are these important, and what impact do these freedoms and laws have on our economy?

Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 22). Assignment 2. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-economics/Assignment2.htm. This work is licensed under a Creative Commons License Creative Commons License