A production possibilities curve is negatively sloped because:
a. the price of a good falls as you move down along the curve.
b. resources are wasted as you move along the curve.
c. it is not possible to adjust production decisions at all once an economy operates on the curve.
d. once on the frontier, it is only possible to increase production of one good by reducing production of the other.
Question 2A government budget deficit will lead to:
a. an increase in the supply of loanable funds and an increase in real interest rates.
b. a decrease in the supply of loanable funds and an increase in real interest rates.
c. an increase in the supply of loanable funds and a decrease in real interest rates.
d. a decrease in the supply of loanable funds and a decrease in real interest rates.
Question 3The output level that occurs in any market that is in equilibrium:
a. is the quantity where the supply curve intersects the y-axis.
b. is the quantity where the demand curve intersects the x-axis.
c. is the quantity at an output level where buyers will pay more than suppliers require.
d. is an output level where buyers will not pay as much as suppliers require.
e. is the quantity where the demand and supply curves intersect each other.
Question 4When resources are used efficiently, you can produce more of one good, ceteris paribus, only by:
a. printing more money.
b. charging a lower price for output.
c. charging a higher price for output.
d. producing less of another good.
Question 5Which of the following will increase the demand for loanable funds?
a. a newly established consumption tax
b. a decrease in the real interest rate
c. an increase in the real interest rate
d. creation of an investment tax credit for businesses
Question 6Assume that Ford Motor Company engineers achieve a revolutionary technological breakthrough in the production process of automobiles. Which of the following is expected to take place?
a. A movement up along the existing supply curve for Ford automobiles
b. The supply of Ford automobiles will remain unchanged
c. An inward shift of the supply curve for Ford automobiles
d. A downward movement along an existing supply curve for Ford automobiles
e. An outward shift of the supply curve for Ford automobiles
Question 7The production possibilities curve illustrates:
a. the minimum quantity of two resources necessary to produce a given level of output.
b. that when resources are currently being used inefficiently, it is possible to increase production of one good only by sacrificing some of another good.
c. that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.
d. the minimum quantities of output that can be produced using available resources.
Question 8Which of the following is likely to increase the equilibrium real interest rate?
a. greater tax benefits for IRAs
b. technological improvement creating profitable investment opportunities
c. elimination of an investment tax credit for corporations
d. an increased consumption tax
Question 9The market supply curve for any product:
a. always depends on the market demand for that product.
b. depends on the general income level of the consumers in the market.
c. is a summation of individual firms' supply curves.
d. equals the total revenue generated through sale of the commodity.
e. is affected by the prices of related products.
Question 10An economy is producing two goods, ice cream and cookies, and is currently operating efficiently. This economy can produce more cookies if:
a. it increases the price of ice cream.
b. it increases the price of cookies.
c. more of the economy's resources become idle.
d. it produces less ice cream.
Question 11If the real interest rate is below equilibrium, which of the following is likely to occur?
a. Lenders will raise their interest rates which will encourage saving.
b. Lenders will raise their interest rates which will encourage borrowing.
c. Lenders will lower their interest rates which will encourage saving.
d. Lenders will lower their interest rates which will encourage borrowing.
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