Consider the production possibilities curve for an economy producing only two commodities wheat (represented on the X axis) and wine (represented on the Y axis). A movement up along the production possibilities curve PPC will imply:
a. an increase in wheat production.
b. an increase in both wheat and wine production.
c. a decline in both wheat and wine production.
d. an increase in wine production.
e. no change in either wheat or wine production.
Question 2If a country wanted to maximize the value of its output, each job should be carried out by the person who:
a. has the highest opportunity cost.
b. has a comparative advantage in that activity.
c. can complete the particular job most rapidly.
d. enjoys that job the least.
Question 3In making the Malthusian Prediction, Reverend Malthus assumed that:
a. technological advance would be rapid; the supply of capital was unlimited; birth control techniques would limit population growth.
b. there would be little if any technological advance; the supply of capital was fixed; birth control techniques would limit population growth.
c. the supply of land was fixed in quantity; there would be little if any technological advance; the sexual desires of humans would work to increase production.
d. the supply of land was fixed in quantity; technological advances would be rapid; the sexual desire of humans would lead to rapid population growth.
Question 4Which of the following ideas is illustrated by the production possibilities curve PPC?
a. There are no limits on the total production feasible in an economy.
b. An economy need not decrease the production of one commodity to increase the production of another.
c. It is possible to satisfy unlimited wants in an economy through proper investment in research and development.
d. When an economy chooses to produce a combination of goods and services, other combinations of goods and services are sacrificed.
e. An economy can specialize in the production of only one good.
Question 5Trade between countries tends to
a. reduce both competition and specialization.
b. reduce competition and increase specialization.
c. increase competition and reduce specialization.
d. increase both competition and specialization.
Question 6In the 1700s, Reverend Thomas Malthus predicted that:
a. per capita economic growth would not change very much since humans were already content with their standards of living.
b. per capita economic growth would tend to rise as modern birth control techniques caused the rate of population growth to decline.
c. per capita economic growth would eventually become negative since population growth would tend to outstrip production.
d. per capita economic growth would tend to rise in the future because technological advances in production would outpace population growth.
Question 7A decrease in the quantity of available resources would be represented by:
a. a steeper PPC.
b. a point inside the PPC.
c. an inward shift of the PPC.
d. an upward movement along the PPC.
e. a downward movement along the PPC.
Question 8The United States can benefit from voluntary trade
a. only with nations that can produce goods the United States cannot produce.
b. only with developing nations.
c. only with nations in Europe.
d. with any nation.
Question 9Rapid population growth can threaten sustained economic growth if it:
a. leads to diminishing marginal returns in production.
b. remains unmonitored by government agencies.
c. enables economies of scale in production to be exploited.
d. leads to increased capital formation.
Question 10Which of the following will bring about an inward shift of a production possibilities curve PPC?
a. A decrease in the amount of resource employment
b. An increase in the working-age population
c. An increase in unemployment
d. A decrease in the availability of natural resources
e. An increase in the amount of capital available
Question 11Two parties can capture gains from specialization and trade whenever:
a. One party is twice as good as producing all goods as the other.
b. The opportunity costs of producing each good are the same for both parties.
c. Both parties can produce equal amounts of both goods.
d. None of the above are true.
Question 12New growth theorists believe that increased economic growth is primarily driven by:
a. higher level of savings.
b. higher level of capital investments.
c. increased foreign investment.
d. technological innovation and ideas.
Question 13Consider a PPC with automobiles on the vertical axis and cotton on the horizontal axis. The discovery of a new fertilizer that improves crop yield will shift:
a. the vertical intercept up but will not shift the horizontal intercept.
b. the horizontal intercept to the right but will not shift the vertical intercept.
c. the horizontal intercept to the left and the vertical intercept upward.
d. the vertical intercept downward and the horizontal intercept to the right.
e. neither the horizontal intercept nor the vertical intercept.
Question 14Which of the following is true?
a. Voluntary trades give both parties more in value than what they give up.
b. Without the ability to trade, people would not tend to specialize as much in those areas where they had a comparative advantage.
c. People can gain by specializing in the production of the good in which they have a comparative advantage.
d. All of the above are true.
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