Which of the following is the most accurate statement about a production possibilities curve?
a. An economy can produce at any point inside or outside its production possibilities curve.
b. An economy can produce only on its production possibilities curve.
c. An economy can produce at any point on or inside its production possibilities curve, but not outside the curve.
d. An economy can produce at any point inside its production possibilities curve, but not on or outside the curve.
Question 2Other things held constant, investment in physical capital will increase:
a. labor productivity.
b. national income.
c. wages.
d. all of the above
Question 3A market survey conducted by an electronics manufacturer reported a year on year growth in the sale of television sets, along with an increase in the selling price. Which of the following could be a likely cause for this situation?
a. A decrease in supply
b. An increase in demand
c. A decrease in demand
d. An exception to the law of demand
e. An increase in supply
Question 4The production possibilities curve is:
a. a graph that shows the combinations of output which are most profitable to produce.
b. a graph that shows the various combinations of output it is possible for an economy to produce given its available resources and technology.
c. a graph that shows the various combinations of resources that can be used to produce a given level of output.
d. a curve that shows the quantity of output that will be offered for sale at various prices.
Question 5According to the crowding-out effect, a budget deficit will lead to:
a. reduced investment spending and a reduction in long-term economic growth.
b. reduced investment spending and an increase in long-term economic growth.
c. increased investment spending and a reduction in long-term economic growth.
d. increased investment spending and an increase in long-term economic growth.
Question 6Assume that at the current market price of 4 per unit of a good, you are willing and able to buy 20 units. Last year at a price of 4 per unit, you would have purchased 30 units. What is most likely to have happened over the last year?
a. Demand has increased
b. Demand has decreased
c. Supply has increased
d. Supply has decreased
e. Quantity supplied has decreased
Question 7What determines the position and shape of a society's production possibilities curve?
a. the physical resources of that society
b. the level of technology of the society
c. the number of factories available to the society
d. all of the above
Question 8The crowding-out effect indicates that increased government borrowing will lead to:
a. an increase in consumption by households and an increase in investment spending by firms.
b. an increase in consumption by households and a decrease in investment spending by firms.
c. a decrease in consumption by households and an increase in investment spending by firms.
d. a decrease in consumption by households and a decrease in investment spending by firms.
Question 9When will a shortage occur in a market?
a. When the actual price is lower than the equilibrium price
b. When quantity supplied is greater than the equilibrium quantity
c. When the quantity that consumers are willing and able to purchase decreases
d. When the quantity available at zero price is insufficient to meet demand
e. When a price floor is set in the market
Question 10The concept of opportunity cost is illustrated by:
a. a movement from the interior of the production possibilities curve to the frontier.
b. a movement from the production possibilities curve to its interior.
c. a movement from a point on the production possibilities curve to the northeast.
d. a movement along the production possibilities curve, as production of one good falls in order to increase production of another.
Question 11A government budget deficit will have a:
a. positive effect on public saving causing a rightward shift in the supply of loanable funds.
b. positive effect on public saving causing a leftward shift in the supply of loanable funds.
c. negative effect on public saving causing a rightward shift in the supply of loanable funds.
d. negative effect on public saving causing a leftward shift in the supply of loanable funds.
Question 12If both supply and demand for a good increase, which of the following will definitely happen?
a. Equilibrium price will remain the same
b. Equilibrium price will increase
c. Equilibrium price will decrease
d. Equilibrium quantity will increase
e. Equilibrium quantity will decrease
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