A combination of two goods which lies beyond the production possibilities curve indicates:
a. underutilization of resources.
b. overutilization of resources.
c. constant opportunity costs.
d. a combination that cannot be produced with existing resources.
e. society's most preferred combination of two goods.
QUESTION 2The oligopoly market structure model is characterized by:
a. many firms in an industry producing differentiated products.
b. many firms in an industry producing identical products.
c. few firms in an industry with natural barriers to entry.
d. a single firm in an industry with barriers to entry.
e. many firms in an industry with barriers to entry.
QUESTION 3If an economy is producing at a point on the production possibilities curve it represents:
a. full employment of existing resources.
b. the gains from trade that an economy can enjoy.
c. the maximum amount of two goods that can be produced with existing resources.
d. decreasing opportunity costs of producing both goods.
e. overutilization of existing resources.
QUESTION 4Which of the following is a characteristic of an oligopoly market?
a. Each firm in an oligopoly market can take independent pricing and output decisions.
b. There are many firms in an oligopoly market hence a firm cannot influence the market price.
c. In an oligopoly market, each firm's pricing and output decisions depend on those of its rivals.
d. Firms in an oligopoly market always manufacture differentiated products.
e. Barriers to entry does not exist in an oligopoly market.
QUESTION 5Which of the following does the production possibilities curve illustrate?
a. The tradeoffs facing a society
b. The fact that more of one product can be produced only by reducing the quantity of other products that are being produced, assuming that resources are being used efficiently
c. The maximum output that can be produced with a limited amount of resources
d. The opportunity cost of alternative choices
e. All of these
QUESTION 6One reason that monopolistically competitive firms often use celebrity endorsements is that:
a. the firm owners like to be around celebrities so they can feel important.
b. they can link their product's reputation with the celebrity's reputation.
c. celebrity endorsements are comparatively inexpensive.
d. they can have the celebrity as their potential customer.
e. firms like to spend a lot on advertisements.
QUESTION 7James has a comparative advantage in the production of corn, while Harry has a comparative advantage in the production of bread. If James and Harry decide to trade with each other, _____.
a. both Harry and James will enjoy gains from trade
b. only Harry will enjoy gains from trade
c. only Harry will suffer losses from trade
d. only James will suffer loses from trade
e. neither of them will gain from trade