A production possibilities curve that is bowed out or concave to the origin:
a. illustrates a tradeoff in which the opportunity cost of a good increases with the level of its production.
b. illustrates a tradeoff in which the opportunity cost of a good decreases with the level of its production.
c. illustrates a tradeoff in which the opportunity cost of a good is constant at all levels of production.
d. demonstrates the fallacy of composition.
Question 2If there were no real wealth or interest rate effect, the aggregate demand curve would still be downward sloping.
a. True
b. False
Indicate whether the statement is true or false
Question 3A price control always benefits consumers.
a. True
b. False
Indicate whether the statement is true or false
Question 4An economy may be operating at a point inside the production possibilities curve if:
a. technological progress enables the economy to produce quantities of output otherwise unattainable.
b. a substantial amount of labor is unemployed.
c. a substantial amount of machinery is idle.
d. either b. or c. occur.
Question 5The interest rate effect helps explain why a lower price level will reduce the quantity of real goods and services demanded as an economy moves down along its aggregate demand curve.
a. True
b. False
Indicate whether the statement is true or false
Question 6When the price ceiling on eggs is lifted, there is a shortage of eggs in the market.
a. True
b. False
Indicate whether the statement is true or false
Question 7Economic growth can be illustrated by:
a. a movement along the production possibilities curve.
b. a movement from a point on the production possibilities curve to a point inside the production possibilities curve.
c. an inward shift of the production possibilities curve.
d. an outward shift of the production possibilities curve.
Question 8The real wealth effect is one reason for the negative slope of the aggregate demand curve.
a. True
b. False
Indicate whether the statement is true or false
Question 9A rent control law, where tenants pay below-market rents, is a market restriction that may induce a decrease in the supply of rented apartments.
a. True
b. False
Indicate whether the statement is true or false
Question 10The bowed production possibilities curve represents:
a. constant opportunity costs.
b. decreasing opportunity costs.
c. increasing opportunity costs.
d. none of the above
Question 11Higher interest rates will tend to reduce aggregate demand, other things being equal.
a. True
b. False
Indicate whether the statement is true or false
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