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W hich ofthe foilowing is not one ofthe three core economic issues that m·ust be resoived?
r
_.r
r
r
How to produce the goods and services we select.
What to produce with unlimited resources .
Who should get the goods and services we produce.
What to produce with limited resources .
Resources are not unlimited.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-03 The three
core economic questions that every
society must answer.
award:
2.
10.00
points
· fhe ..f'lir1Ciameniar iirobl'em.oie·c:c;r;c;n:,rc:s··r;s·········
I
_.r
The law of increasing opportunity costs.
The scarcity of resources relative to human wants.
I
How to get government to operate efficiently.
I
How to create employment for everyone.
Wants will always exceed resources .
Multiple Choice
Difficulty: 1 Easy
Learning Objective : 01 -01 How
scarcity creates opportunity costs.
award:
3.
10.00
points
····A·ca·nseq"Ljen·ce··ot·the·· e·cono·n,-ic··prot>ie·m··ot··s·carcitY··is··that····································· ········· ···· · ··························································· ·
_.r
r
Choices have to be made about how resources are used.
There is never too much of any good or service produced.
(
The production of goods and services must be controlled by the government.
I
The production possibilities curve is bowed outward.
Scarcity means choices must be made.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective: 01-01 How
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· · ··whicil .of'thetollowin9 .is.nat·a:tador.Cit .praali-ctioi1?
C A psychiatrist.
_ , [' . The $100,000 used to start a new business.
(" A bulldozer.
(" Six thousand acres of farmland .
Land, labor, capital, and entrepreneurship are the factors of production. Money does not fall under any category of the
factors of production. Factors of production are what are needed on a camping trip. Money is not needed on a
camping trip.
Multiple Choice
Difficulty : 2 Medium
Learning Objective: 01-01 How
scarcity creates opportunity costs.
award:
5.
10.00
points
· · ·····w·th·· re·s·pect··tc;·tacto·rs··ot··proauctfo·n·:·which··at··the··ta·iiO-wl·n·g·s·ta·te·rrlents··,s··noiir·u·e? ···· ···· · ···········
Factors of production are also known as resources.
In order to produce any good or service, it is necessary to have factors of production .
Factors of production include land, labor, capital, and entrepreneurship.
Only those resources that are privately owned are counted as factors of production.
Even resources owned by governments count as factors of production.
Multiple Choice
Difficulty: 2 Medium
Learning Objective: 01-01 How
scarcity creates opportunity costs .
award :
6.
10.00
points
·· Wilicil c;rtiletaiiCiwin9.is.tile.be5texamilie..oi'iaiia? ·
The ethanol refined from corn.
A factory that produces new goods and services.
__,(" The water used to make a soft drink.
(" A barber's chair.
If it directly becomes a part of the final product, it is land or a raw material. Water used to float a boat is the same as a
delivery van. In this case it would be capital.
Multiple Choice
Difficulty : 2 Medium
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Learning Objective : 01-01 How
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··· ·············capJtai,···as ··econ·c;mists··use··ihe- ·term ~··re"fers· · ta
r
The money needed to start a new business.
r
The costs of operating a business.
(' Shares of stock issued by businesses.
_.r
Final goods that are used to produce other goods and services.
Physical capital is used to produce other goods and services, including other capital goods. Hammers produce
houses. Forklifts move forklift parts around a forklift factory . Money is financial capital, which is a throughput. It is used
to acquire a hammer or physical capital.
Multiple Choice
Learning Objective: 01 -01 How
scarcity creates opportunity costs .
Difficulty: 1 Easy
award:
8.
10.00
points
V'ihicil economisT ar9.i.iecftilat'ti-ee mari<ei's i.in.leasiled'tile·;,;u1imal 5i)irH5·· c;ye;·i i·i re.pren.elirs •.propeii'ii19..ini1ovation . · · ... ·
technology, and growth?
(' Lord Kelvin.
!
Kenneth Olsen .
(' Irving Fisher.
_.r
John Maynard Keynes.
Competition leads companies to always try to do something better and more efficiently in order to maximize profits.
Multiple Choice
Learning Objective: 01-01 How
scarcity creates opportunity costs.
Difficulty : 1 Easy
award:
9.
10.00
points
Econonl.fCS ·c·an ·be
define·a·as the study of
..................... .
r
For whom resources are allocated to increase efficiency.
(
How society spends the income of individuals.
_.r
r
How scarce resources are allocated on a macro level to best meet society's goals or on a micro level to
best meet an individual's or firm's goals.
None of the choices are correct.
Economics studies how we get the most we can out of what we have.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective: 01-01 How
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··········:rh·e ··,-igu·n·s ·v·e·r;ius ··butter;•··a ·i ·iemma··tha·t ··a·~I-·natio·ns ··contro·nt' ·is··ihat ·····
r
-.r
··--·····································
Guns and butter can be produced using the same resources at the same time.
An increase in national defense implies more sacrifices of civilian goods and services.
(' An increase in national defense is possible only if we produce more butter.
r
All of the choices are correct.
To get more of one good , we must sacrifice production of other goods. "Guns versus butter" is a figurative way of
expressing the trade-off between defense and civilian goods and services.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-01 How
scarcity creates opportunity costs .
award:
11
10.00
points
· · ·Wilicil.ortile tollowiii·g: ·i;;. a:;;·assumi:>tio·ri·u·naer.wtira; itie.i:>r·oau'Ciiori .p.ossi5iiities . clirve . is ·arawn? .....
(' Total unemployment is zero.
-.r
The supply of resources is fixed .
(' The price level is changing.
(' Technology is changing.
The production possibilities curve is a snapshot of a short time frame when resources are fixed.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-02 What the
production-possibilities curve
represents.
award:
12.
10.00
points
··Wi1icil . Cifii1etoilowiri9 . correctiy. ci1arac:terize5.iile.shape.oi·a·c:ari5tar1i.opport.uiiity.C'osi'i:>roduction.pos.sibiiities. cuiVe?···· ·
r A straight line indicating that the law of increasing opportunity costs applies.
-.r
r
r
A straight line when there is constant opportunity costs.
A line that curves outward when resources are perfectly adaptable in the production of different goods.
A line that curves inward when resources are perfectly adaptable in the production of different goods.
A straight-line production possibilities curve means resources are equally adaptable to producing either good.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective : 01-02 What the
production-possibilities curve
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... . According to the 'iaw .ot increasing opportunity costs,
{
Greater production leads to greater inefficiency.
(' Greater production means factor prices rise.
_,r
r
Greater production of one good requires increasingly larger sacrifices of other goods.
Higher opportunity costs induce higher output per unit of input.
The opportunity cost rises incrementally as more of one particular good is produced .
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-02 What the
production-possibilities curve
represents.
award :
14.
10.00
points
ifan' ecoiiomy exp'eri'e'ricesi'ii'creasing opportunity costs with respect to two goods, then the production possibilities
curve between the two goods will be
_,r
Bowed outward or concave from below.
r
A straight, downward-sloping line.
r
Bowed inward or convex from below.
r
Bowed outward until the two goods are equal, and then bowed inward .
A bowed-out production possibilities curve means opportunity costs are increasing as we move from one point to
another along the curve.
Multiple Choice
Difficulty: 2 Medium
Learning Objective: 01-02 What the
production-possibilities curve
represents .
award:
15.
10.00
points
· iftheUiii'ted states a·edCi.es to convert alitoiilotii.le.iactories !o.iank prodlic:tioii·:· a5 .itdi<fdliri ri'9 WaMWar
that some auto manufacturing facilities are not well suited to tank production , then
r
r
r
_,r
i( i:ilitfiiids ...
The production possibilities curve between tanks and automobiles will appear as a straight line.
The production possibilities curve between tanks and automobiles will shift outward .
Decreasing opportunity costs will occur with greater automobile production .
Increasing opportunity costs will occur with greater tank production .
Factors of production, including capital, are specialized , meaning they are generally better suited for one use.
Multiple Choice
Difficulty : 3 Hard
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Learning Objective: 01-02 What the
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.. The points ori a production possibilities curve show
r
r
---->r
r
Desired output
Actual output
Potential output
None of the choices are correct
Potential output is the maximum attainable output with our limited resources, and the production possibilities curve
shows the limits of our options.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-02 What the
production-possibilities curve
represents.
awa rd :
17.
10.00
points
r
r
---->r
r
There is full employment of resources.
It is operating efficiently.
It can produce more of one good without giving up some of another good.
There are not enough resources available to produce more output
No goods must be given up to move from an inefficient to an efficient level of production . Hence, there is no sacrifice
or opportunity cost.
Multiple Choice
Difficulty: 2 Medium
Learning Objective: 01-02 What the
production-possibilities curve
represents.
awa rd :
18.
10.00
points
. . . . . . ... . . . . · · ·the··m·a·rket ·m·echa·nis·m·
r
r
r
---->r
Is not a very efficient means of communicating consumer demand to the producers of goods and
services.
Works through central planning by government
Eliminates market failures created by government
Works because prices serve as a means of communication between consumers and producers.
Buyers choose how much to buy based on price; profitability and therefore production are driven by prices.
Multiple Choice
Difficulty: 1 Easy
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Learning Objective : 01-04 How
market and government approaches
to economic problems differ.
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. A City's decisi'Orl ..tOHniit
srTiokhig in public..8reas is·· a·n. e·xample of
(" The invisible hand at work.
(" The market mechanism at work.
(" Market success.
_,(" Government intervention.
Governments can sometimes improve market outcomes.
Multiple Choice
Difficulty: 2 Medium
Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
award:
20.
10.00
points
....................................
.............................
A mixed economy
(" Is justified by the superiority of laissez fa ire over government intervention.
_,r
r
Utilizes both market and nonmarket signals to allocate goods and services.
Relies on the use of central planning by private firms rather than the government.
(' Is one that allows trade with other countries.
Most industrialized economies are mixed economies: they are based on market principles but still have significant
roles for government intervention in the allocation of goods and services.
Multiple Choice
Difficulty : 1 Easy
Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
award :
21
10.00
points
···· 'Wheilifie. iililisii:iie. tiaii·d·aaes .iiotproCiuceo.ptimaT·ouicom.es . tor.ttie·e;·c;c,;,()n,y; ·ifiere . is.eilidenceot·· · ·
_,("" Market failure .
r
Government failure .
("" Macroeconomic failure .
(" Scarcity.
Market failure situations call for possible government action to hopefully improve the outcome toward a socially
optimal or socially efficient outcome.
Multiple Choice
Difficulty : 1 Easy
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Learning Objective: 01-04 How
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· · ······
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\Nhicil c;nt-.e touowing.is i?oia ·rTi·acroeconorTiic s·tatement? ··
r
The unemployment rate for the United States rose to 5 percent in the last quarter.
Q The Federal Reserve lowered interest rates at its last meeting .
r
Congress increased the minimum wage rate in January.
__.(' Jenny's wage rate rose, and in response, she decided to work more hours.
The wages of a particular worker are a microeconomics topic.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
award:
23.
10.00
points
·· ihe.study.otmicroeconomictileory.tocuses··c;·;; ·tile·········
__.(' Structure and performance of individual markets and the operation of the price system.
r
Operation of the entire economy.
Role of the banking system in the economy.
Interaction of international trade and domestic production of goods and services .
Microeconomics studies how the foundation of an economy and individual markets work.
Multiple Choice
Difficulty: 1 Easy
Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
award:
24.
··
10.00
points
Microeconomics is concerneCi .wiii1 issues such as
__.(' The demand for bottled water by individuals.
r
The level of inflation in the economy.
t
Maintaining a strong level of economic growth .
r
All of the choices are correct.
The demand for a particular product is a microeconomic topic.
Multiple Choice
Difficulty : 1 Easy
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Learning Objective : 01-04 How
market and government approaches
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Ecailorri'ic··n:;;;aeis are used bYeconomiststo ··
r'
Predict economic behavior.
r · Develop economic policies.
r
Explain economic behavior.
All of the choices are correct.
The economic models are designed to benefit society and prevent us from doing things that lead to lower living
standards.
Difficulty : 1 Easy
Multiple Choice
Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
award:
26.
10.00
points
A
•
Housing
D
Figm·e 1.1
P1·oduction Possibi.Uties
Cu1~e
At which point is society employing some of its available technology but not all of it? (See Figure 1.1.)
r A
r B.
_,r c.
r . D.
We could produce more by using the resources we have more efficiently.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
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.s
D
PP1
PP2
OUTPUT OF PLASMA TElEVISIONS
Figure 1.4
A movement from point C to point A in Figure 1.4 results in
(' More efficient production .
(' Permanent unemployment of workers producing plasma televisions.
(' A reallocation of resources from MP3 player production to plasma television production .
_.(' A reallocation of resources from plasma television production to MP3 player production .
Moving from one point to another on the same production possibilities curve represents changing the combination of
the two goods.
Multiple Choice
Difficulty : 3 Hard
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Learning Objective : 01-02 What the
production-possibilities curve
represents.
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D
PP1
PP2
OUTPUT OF PLASMA TElEVISIONS
Figua·e 1.4
In Figure 1.4, a shift of the production possibilities curve from PP1 to PP2 could be caused by
I
An increase in the unemployment rate.
__.( Implementation of training programs that improve the skills of workers.
r
A flu epidemic that makes many workers sick.
I
Tougher pollution controls for the producers of plasma televisions and MP3 players.
An increase in any resource, including physical or human capital, increases the production possibilities curve .
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
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D
•
A
•
PPl
PP2
OUTPUT OF DOUGHNUTS
Figure 1.5
Using Figure 1.5, if an economy is currently producing on PP2, which of the following would shift the production
possibilities curve toward PP1?
(" An increase in the quantity of labor available.
-+C
A decrease in the amount of capital available.
(" An increase in the level of unemployment above the normal level.
An advancement in technology.
If resources decrease, the production possibilities curve will shift inward toward the origin .
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
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PP1
PP2
OUTPUT OF SUVs
Figure 1.6
Using Figure 1.6, if an economy has the capacity to produce represented by PP1, then point E represents
I
I
A combination of cars and SUVs that is not attainable.
I
A change in technology.
_.I
A constant trade-off between cars and SUVs.
An efficient use of resources.
Any point on the production possibilities cuNe is considered efficient.
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities cuNe
represents.
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PP1
PP2
OUTPUT OF SUVs
Figure 1.6
In Figure 1.6, at which of the following points would the opportunity cost of producing one more car be the lowest?
-.C F.
C B.
C.
D.
Since most of the economy is devoted to SUV production at point F, allowing more resources to go toward car
production would result in only a small loss of SUVs (a low opportunity cost) . Since point "D" is not on a PPC, its
slope cannot not be determined .
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
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.......................... ,
PP1
PP2
OUTPUT OF SUVs
Figure 1.6
In Figure 1.6, at which of the following points would the opportunity cost of producing one more SUV be highest?
!
A.
(' B.
(' C.
-.r
F.
Opportunity cost is determined by the slope of the production possibilities curve. The slope is steepest at point "F" for
all of the possible answers. Since point "A" is not on a PPC, its slope cannot be determined .
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
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.............................................................
I
--------~,E
I
I
I
--------;p-1fi
I
I
I
0
K L M
ClOTHING OUTPUT
(units per year)
Figua·e 1.7
Refer to Figure 1.7. This economy will achieve efficiency in production at
r
Point D only.
r
Point G only.
r
Point J only.
_.r
Points D, G, and J .
Any point along the production possibilities curve is considered an efficient point.
Multiple Choice
Difficulty : 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
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A
·• N
I
B -------- '- ~. ,E
f
-- --- -- - ~IF--!-IH
I
J
I
I
I
0
K LM
ClOTHING OUTPUT
(units per ye~ar)
Figua·e 1.7
Refer to Figure 1.7. The cost of producing at point G rather than point 0 is
r
OA units of food.
(' KL units of clothing .
_.r
AB units of food.
(' OL units of clothing .
To get additional clothing, food must be given up as resources are shifted out of the food industry.
Multiple Choice
Difficulty : 3 Hard
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.............................
A
'
'I I
_,____ ___ t:_..,._
B . -------- tEI
1F
0
1:H
I
I
I
I
I
I
K L M
ClOTHING OUTPUT
(units per year)
Figua·e 1.7
Refer to Figure 1.7. The benefit of producing at point G rather than point Dis
I
_.r
OA units of food .
KL units of clothing.
( , AB units of food.
I
OL units of clothing.
By moving resources out of the food industry and into the clothing industry, more clothing may be produced .
Multiple Choice
Difficulty: 3 Hard
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A
I
B
-------- tE
I
I
I
I
-- - ---- -'f: - -1IF IH
I
I
I
0
K L M
CLOTHING OUTPUT
(units 1
per year)
Figur·e 1.7
Refer to Figure 1.7. The cost of producing at point D rather than point J is
___.(' KM units of clothing.
(' AC units of food .
(' OM units of clothing .
(' OA units of food .
Additional food may be produced by giving up the opportunity to produce clothing .
Multiple Choice
Difficulty: 3 Hard
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points
A
I
B -------- ~ IE
I
I
I
- --- -- --t:-:--.~
,F IR
I
I
I
0
K L M
ClOTHING OUTPUT
(units per year)
Figu1·e 1.7
Refer to Figure 1.7. If this economy is currently producing at point F, then by employing more resources this economy
Can move to point D, but not points G or J .
_,('. Can move to points D, G, or J .
I
I
Can move to point G, but not points D or J .
Will remain at point F.
Inefficient production results when resources are not being fully used. Using more resources moves us toward-in
this case, onto-the production possibilities curve.
Multiple Choice
Difficulty : 3 Hard
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Learning Objective: 01-02 What the
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................................
A
•N
:1
B
------- ,-t, ,E
I
:1
I
--------;i1E:
I
I
I
0
K LM
CLOTHING OUTPUT
(units per year)
Figu1·e 1.7
Refer to Figure 1.7. Which of the following points are considered to be inefficient?
r
D.
_,(" E.
r
r
G.
D, G, and J .
Production choices that fall inside the production possibilities curve are considered inefficient.
Multiple Choice
Difficulty: 3 Hard
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production-possibilities curve
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,N
I
B --------~,E
I
I
I
--- ----- t:- .... ~
1F 1H
0
I
I
I
I
I
I
I :
K LM
CLOTHING OUTPUT
(units per year)
·Figut·e 1. 7
Refer to Figure 1.7. Which of the following points show unemployment of resources above the normal rate?
_.r
H.
r
r
J.
r
D.
N.
Resources must be unemployed at production levels below the production possibilities curve .
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
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10.00
points
·········· --······· tal:>ie1 : fshows .tf18' ti'Yi>otheiicaf'i'rade~o1Tl:>etween··arfierei1!·c·ari1biriaiiari·s ·of's!eaHh"b'am5ers.ai1Ci· s~1-bari1l:>ers .ttiai
might be produced in a year with the limited U.S. capacity, ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers .
Opportunity cost
Combination
s
T
lJ
v
ofSt~:!a lth
Number
of Stealth
Bo1ubers
10
9
7
..J.
Bombers in
Terms of B-ls
Number
ofB -l s
0
Opportunity·
Cost of B-l s in
Terms of Stealth
Bombers
1
2
..,
.-~
Table 1.1
Production Pos ·ibilities fo1· Bombers
In the production range of 7 to 9 Stealth bombers, the opportunity cost of producing 1 more Stealth bomber in terms of B
-1s is
r
r
_.r
r
0.
3.
0.5.
2.
In this production range, 2 additional stealth bombers require us to forgo the opportunity to produce one entire B-1
bomber, or half a B-1 bomber for each Stealth bomber.
Combination
s
T
lT
y
Opportnnit:· cost
of Stealth
Number
of Stealth
Bombers in
Bombers I Terms ofB-ls
10
9
1 I =1
7
I ..;- 2 = 0.5
...,
I
4
J ... = ().:~3
I
Nu1nber
ofB -l s
0
1
2
......,
Opportunity
Cost ofB-ls lll
Terms of Stealth
Bombers
1
-...,
.'
1 :::;;: 1
1=2
..,
l = ·'
Tnble 1.1 Answer·s
Multiple Choice
Difficulty : 3 Hard
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·· ·· ······ ia5ie · 1 ·: fstiow5iiletiypoiileiicaTirade~ofi..5eiWeeil. difiereni.carTihir1atior15'oisiealthhombers.and. s~·1···5orTihers .iilai··· ·
might be produced in a year with the limited U.S. capacity, ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers.
Opportunity cost
of Stealth
Bombers in
Terms ofB-1s
s
Nu mber
of Stealth
Bombers
10
T
9
1
TJ
7
2
\"
4
Combination
Number
ofB -ls
Opportnn it)'
Cost of B-1 sin
T enns of Stealth
Bombers
0
Tltble 1.1
Pt+oduction Possibi.lities for Bombe.-s
The highest opportunity cost anywhere in Table 1.1 for Stealth bombers in terms of B-1 bombers is
1 B-1 bomber per Stealth bomber.
(
3 B-1 bombers per Stealth bomber.
C: 2 B-1
r
bombers per Stealth bomber.
0.5 B-1 bomber per Stealth bomber.
This is one of the extreme points on the production possibilities curve where it meets the axis on the Stealth bomber
end .
Combination
s
T
u
· Opportunity cost
of Stealth
Number
of Stealth
Bomben in
Terms ofB-ls
Bombers
10
1 . :;- 1 = 1
9
7
l -+- 2 = 0.5
I + 3 = 0.33
Number
ofB -ls
0
1
2
Opportunity
Cost of B- 1s in
Terms of Stealth
Bombers
1 -+- 1 ;:; 1
2+ 1= 2
-- ·'. ,
Table 1.1 Answer·s
Multiple Choice
Difficulty: 3 Hard
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......... .... ........ fabie ·1 :fsti.ows ..iheilypotheticai.'i'rade~otfbetween. dittere.ni · c-;;rTihiriaiioiis" of' 'siea'lih ' b'ombers. aria· s~1 - borTibers .!ilat
might be produced in a year with the limited U.S. capacity, ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers.
Combination
s
T
Number
of Stealth
Bombers
10
Opportunity cost
of Stc:alth
Bombers in
Terms of B-ls
v
ofB -ls
0
9
7
4
u
Numbcr
Opportunity
Cost ofB-l s in
Terms of Stealth
Bombers
1
I
·'"'
Ti\ble 1.1
P1~oduction
Possibilities fm· Bombe1·s
The highest opportunity cost anywhere in Table 1.1 for B-1 bombers in terms of Stealth bombers is
I
1 Stealth bomber per B-1 bomber.
_.r
3 Stealth bombers per B-1 bomber.
I
I
2 Stealth bombers per B-1 bomber.
0 .5 Stealth bomber per B-1 bomber.
This is one of the extreme points on the production possibilities curve where it meets the axis on the B-1 bomber end .
Number
of Stealth
Opportunity cost
of Stc:alth
Bombers in
N umber
Combination
Bombers
Terms ofB-l s
ofB-l s
Opportunity
Cost ofB~ l s in
Terms of Stealth
Bombers
·-s
10
9
7
4
0
1
1 -;-- 1 = 1
T
tT
y
Multiple Choice
I+ l =1
1 -;-- 2 == 0.5
1 + ~ = 0 ~ ~.~
Difficulty: 3 Hard
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I
...
_)
2+ 1= 2
:; -;-- 1 -- -'~
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················ ··· · ·· ·· ·· ta·bie· ·1 ·:·1··· shows··the·· hypoiheti·ca·i··t·r~iae~cifhetwe·en··artte·r·e·nt·cc;-rrlbi·n·atto·n·s··a·t ·steaHh · bombe·rs·ana··s~·1···b·omhe·rs··that·
might be produced in a year with the limited U.S. capacity, ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers.
Combination
s
T
l_l
\"
Number
of SteHlth
Bombers
10
9
7
4
Opportunity cost
of Stealth
Bombl!rs in
Terms ofB-l s
Number
ofB -ls
0
Oppnrtnn ity
Cost ofB-lR in
Terms of Stealth
Bombers
1
)
....
·"
Table 1.1
Pt'Oducti.on Possibilities fm· Bmnbers
The lowest opportunity cost anywhere in Table 1.1 for B-1 bombers in terms of Stealth bombers is
r
0 Stealth bombers per B-1 bomber.
r
2 Stealth bombers per B-1 bomber.
_.r
1 Stealth bomber per B-1 bomber.
(" 0.5 Stealth bomber per B-1 bomber.
This is one of the extreme points on the production possibilities curve where it meets the axis on the Stealth bomber
end.
Opportunity cost
of Stealth
Bombers in
Terms ofB-l s
s
Number
of Stealth
Bombers
10
T
9
u
7
1+ 2=
y
4
.I
Combination
Multiple Choice
17 1 = 1
. "" - o
7
.) -
Difficulty: 3 Hard
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o.:
••""t...,
).)
Number
ofB -ls
0
1
2
.....
-"
Opportunity
Cost ofB-ls in
Terms of Stealth
Bombers
1+ 1= l
2+1=2
~ + 1
- .'\. ,
-
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iai:>ie ·1-:2stiows. ii1eti'Yi'oii1eiicafiiaCie~offi:>etvieen··aHie.reilt'cori15iiiaiior15· afsiea'fth.t>omtiers.aild"s~1-borTii:>e·,:-s ·ii1ai·············
might be produced in a year with the limited U.S. capacity , ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers.
Opportunity Cost of
u.mber of Stealth Bo~bers in
Stealth
Terms of B -1
Bombers ,
Bombers
195
I
180
1
150
100
j
I
Combitwtion
A.
B
c
D
I
Number of Opportunity Cost ofB I Bombers in Terms of
B-1
Stealth Bombers
Bombers
20
35
..t5
50 --------------
Tnble 1.2
Production Possibilities fot• Bombers
On the basis of your calculations in Table 1.2, what is gained by producing at point B rather than point C?
I
45 B-1 bombers.
_,I 30 Stealth bombers.
I
180 Stealth bombers.
("' 10 B-1 bombers.
Reallocating resources to Stealth bombers will allow 30 (180- 150) additional Stealth bombers to be produced.
Combination
A
B
('
D
Opportunity C{.lS! of
Number of Stealth Bombers in N\nuber of Opportunity Cost ofBTenus ofB -l
B-1
Stealth
1 Bombers in Terms of
St.:alth Bombers
Bombers !
Bombers
Bomh~rs
20
195
"'~~ -:- 15 - 1
15 -:- 15- l
180
~"'
30 + 10 = 3
45
10 + 30 = 0.33
150
5+50=0.1
50-:- 5 = 10
100
50
·~
Table 1.2 AnsweJ•s
Multiple Choice
Difficulty: 3 Hard
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Table 1 :2-sti.ows..ifle. ilyiJoiheii'C:a.iirad'e~aw··t>EiiWeen. ciYtte.r!:i'ni e:·ari1bi'nations.oTsieafitibombers ..ar1ei . s >i.bori1be.rs .iflai····--·--···
might be produced in a year with the limited U.S. capacity, ceteris paribus. Complete the table by calculating the
required opportunity costs for both the B-1 and Stealth bombers.
II
Opportunity Cost of
Number of St!!alth Bomlx :rs in
Stealth
Terms ofB-1
Bombers 1
Bombers
I
C ombin<~lion
A
Number of Opp01innity Cost ofB B-1
l Bmnbers in Terms of
Bombers
~tealth Bombers
20
35
195
B
1lW
c
I
If
1:0
100
D
..J5
50
·····--
Table 1.2
Pt'Othtctiou Possi.bilities fot· BombN-s
On the basis of your calculations in Table 1.2, what is gained by producing at point B rather than point A?
I
35 B-1 bombers.
I
195 Stealth bombers.
_.r
I
15 B-1 bombers.
15 Stealth bombers.
Reallocating resources to B-1 bombers will allow 15 (35- 20) B-1 bombers to be produced .
Opportunity Cost of
Stealth Bombers in
Number of
Stealth
Tenus ofB-1
Combination
Bombers 1
Bomb-:rs
;\
195
I
15+15 - 1
B
!
180
- jl5o----~150
10 + 30 = 0.33
5+50 = 0.1
D
100
I
c
.
Number of
B-1
Bombers
Opportunity Cost ofB1 Bombers in Tenns of
Stealth Bombers
20
,.,
-
.~)
45
50
15 +15-1
30 + 10 =3
50 + 5 = 10
Tabll' 1.2 .-\.nswl'l'S
Multiple Choice
Difficulty: 3 Hard
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Table 1:3-sh.ows .the.. hypoitieti"cafirade~offtietween diHerent·c-omhi"iiaiioii·s· of -brushes ancfcombs that..might.be.. produced
in a year w ith the limited capacity for Country X , ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Combination
J
K
Number
of
Bmshes
0
10
Oppottuni ty Cost
ofBn1shes in
Tenus
of Combs.
17
L
M
N
21
?~
-·'
Oppmiunity Cost
of Combs in Tenus
of Brushes
:-Jumber
of Combs
4
3
2
1
0
Table 1.3
Production Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, what is gained by producing at point M rather than point N?
r
r
_.r
r
23 combs.
21 combs.
1 comb.
2 combs.
Sh ifting resources toward production of combs allows for greater comb production (1 - 0).
Combination
J
K
L
}v(
N
Number
of
Bntsltes
Opportunity Co:o:.t
of Brushes in
Terms
of Combs
0
10
17
1 7 10=0. 10
1 77=0. 14
1 .;. 4 = 0.25
1 .;. 2 = 0.50
21
23
Opportunity Cost
ofCombs in Tenus
ofBn1shes
:-Jumher
of Combs
4
3
2
1
0
I
10 7 1 = 10
771=7
4.;. 1 = 4
2.;. 1 = 2
Tolble 1.3 Answers
Multiple Choice
Difficulty: 3 Hard
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fabie"1:3shows..iiieilypotiieiicaf"i"rad"e~o·ff between··artferent ·c:·Ciilihi"iiatiaii·s··c;tt>rl.l5.iie5 .aiid..combs..i iiai""inight be produced
in a year with the limited capacity for Country X , ceteris paribus. Complete the table by calculating the requ ired
opportunity costs for brushes and combs.
Combination
J
K
L
1vt:
N
Number
of
B111shes
0
10
17
21
Oppornutity Cost
of Bru sh~s in
Tenus
of Combs
Opportunity Cost
of Combs in Terms
of Brushes
::.lumber
of Combs
4
3
2
1
0
?~
--~
Table 1.3
Production Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, what is gained from producing at point L rather than point K?
I
17 combs.
I
10 combs.
I
1 brush .
---.1 7 brushes.
Shifting resources toward production of brushes allows for greater brush production (17- 10).
Combi11ation
J
K
L
1vf
N
Number
of
Brushes
0
10
17
21
23
Opportunity Cost
of Brushes in
Terms
of Combs
::.lumber
of Combs
I
Opportunity Cost
ofCombs in Tenus
of Brushes
4
1-:-1 0 = 0.1 0
1-:- 7 = 0.14
1 + 4 = 0.25
.....
1 .... 2 = 0.50
0
~'
2
1
10-:- 1 = 10
I
I
I
7-:- 1 = 7
4 -:- 1 = 4
2+ 1= 2
Table 1.3 Ans·we:rs
Multiple Choice
Difficulty : 3 Hard
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········ i'abie ·1 ·:3stiows .ttie. ti'Yi>oft1eticai'traCie~of'f6etween .ci'i'fierentcom5i'riafioris. oi.b'riJsties. arid'cam5s.itiat"mi9h'i.5e.praCiiJceCi.
in a year with the limited capacity for Country X, ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Combination
J
Number
of
Brushes
K
0
10
L
M
21
N
.?"'
.... .
Oppottuitity Cost
of Brushes in
Tenus
of Combs
17
,
Opportunity Cost
of Combs in Terms
of Brushes
::Jumbcr
of Combs
4
3
2
1
0
Table 1.3
P'roduction Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, the law of increasing opportunity costs applies to
_,r
r
r
Both brushes and combs.
Combs but not brushes.
Brushes but not combs.
(" Neither brushes nor combs.
A production possibilities curve will be bowed out from the origin where there are increasing opportunity costs.
Combination
J
K
L
M
N
Number
of
Brush es
0
10
17
21
__,
?""
Opp01turuty Cost
of Bnlshes in
Terms
of Combs
1 -:- 10 = 0.1 0
1-:- 7 = 0. 14
1 + 4 = 0.25
l + 2 = 0.50
::.Iumber
of Combs
4
"'
2
I
1
I
0
I
Opportunity Cost
of Combs in Tenus
of Brushes
10 + 1 = 10
7-:-1 = 7
·'
I
4+ 1 = 4
2 + 1= 2
Table 1.3 Ans·we:rs
Multiple Choice
Difficulty : 3 Hard
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3·shows··the··hy·p·othettca·i·i raae-otr·betwe·en··artte·re·ni·c·o·rr,-bt·n·ation·s·ot ·b·r·u·s·hes··a·n·a·combs-·that··rr,-IQht ·
Table 1.
bfi·-~;rod·u·cea·
in a year with the limited capacity for Country X, ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Combination
J
K
Number
of
Brushes
0
Opportunity Cost
of Brushes in
Terms
of Combs
..,
_,
10
17
L
M
N
Opportunity Cost
of Combs in Tenus
of Brushes
)lumber
of Combs
4
21
2
1
23
0
Table 1.3
Prmluction Possibilities for Brushes anti Combs
On the basis of your calculations in Table 1.3, in the production range of 2 to 3 combs the opportunity cost of producing
1 more comb in terms of brushes is
r
--+r
3.33.
1.0.
r
o.67.
r
o.14.
Shifting resources toward more combs requires a drop in the production of brushes.
Combination
J
K
L
1vf
N
Number
of
Brush es
0
10
17
21
Opp l)ftunity Cost
of Brushes in
Terms
of Combs
1 7 10 = 0.10
1 7 7 ::: 0.14
1 ..;. 4 = 0.25
l + 2 = 0.50
23
Opportunity Cost
of Combs in Terms
of Brushes
)lumber
of Combs
4
3
2
1
0
I
I
1071 = 10
771 = 7
4+ 1= 4
2+ 1=2
T;lble 1.3 Answers
Multiple Choice
Difficulty: 3 Hard
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. . . . ·::rabie--·1.:fsh·ows. the··hypoth9ticai'irade~Off between··artte·r·Eint"co·m'bl·n·atio·n·s··a·t·brUs·hes--a·nd combs··thaf·might be produ·ced
in a year with the limited capacity for Country X, ceteris paribus. Complete the table by calculating the requ ired
opportunity costs for brushes and combs.
Number
of
Combination
J
K
Bmshes
0
10
L
M
N
Opportunity Cost
of Brushes in
Terms
of Combs
Opportunity Cost
of Combs in Tenus
of Brushes
:-J"umber
of Combs
4
"_,
17
...
21
23
1
0
·' )
Table 1.3
Production Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, in the production range of 21 to 23 brushes the opportunity cost of
producing more comb in terms of brushes is
r
r
_.r
r
1121 .
21123.
112.
4.
Shifting resources toward more brushes (2) requires a drop in the production of combs (1). Therefore for each 1
brush , Y. a comb is given up (1 divided by 2) .
Number
of
Combination
J
K.
L
M
N
Bmshes
Opportunity Cost
of Brushes in
Terms
of Combs
:-Jumber
of Combs
1 -:- 10 = 0. 10
1 -:- 7 = 0. 14
"_,
2
1 .;. 4 = 0.25
l .;. 2 = 0.50
1
0
0
10
17
21
23
4
Opportunity Cost
ofCombs in Terms
of Brushes
I
10-:- 1 =10
I
7-:- 1 = 7
4+ 1=4
2+ 1= 2
Table 1.3 An swers
Multiple Choice
Difficulty : 3 Hard
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ot
.................... i'at>ie 1::fstiows..tile hypothetical trade~off between different combinations. brushes -and combstilafmight be produced
in a year with the limited capacity for Country X , ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Combination
J
K
L
Jv(
Number
of
Bntshe$
0
10
17
21
23
N
Opportunity Cost
ofBrushes in
Terms
of Combs
Opportunity Cost
of Combs in Terms
of Brushes
::.Iumber
of Combs
4
3
2
1
.
0
Table 1.3
l~oduction
Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, in the production range of 1 to 2 combs the opportunity cost of producing
1 more comb in terms of brushes is
___.r:.
4.
1/2.
c
c
2/17.
1/7.
Shifting resources toward more combs requires a drop in the production of brushes.
Combination
J
Number
of
Bmshes
0
K
10
L
17
Jv(
21
23
N
Oppommity Cost
of Brushes in
Terms
of Combs
1 + 10 = 0.10
1+7 =0. 14
1 + 4 = 0.25
1 + 2 = 0.50
w
I
Number
of Combs
4
3
2
1
!
0
I
Opportunity Cost
ofCombsmTerms
ofBrushes
I
i
I
10 + 1 = 10
7+1=7
4.;.1=4
2+1 =2
T•lble 1.3 Answers
Multiple Choice
Difficulty: 3 Hard
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···· rabie '1:3' 5ti.ows"if1e"tiypotfietica·i··irade~ofi.betweeil . Ciifiere.i1i'C'oilibir1aiions.ot5'rlis'hes .ar1d'cCiiTi55''i f1ai"ini9h'i.be'P'raCiuceCi.
in a year with the limited capacity for Country X , ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Opportunity Cost
of B111shes in
Terms
of Combs
K
Number
of
Brushes
0
10
L
17
...
1vf
21
N
7~
1
0
Combination
J
Oppmiunity Cost
of Combs in Tenus
of Brushes
:.Iumber
of Combs
4
...,
_,
·' )
-·'
Table 1.3
Production Possibilities for Brushes and C ombs
On the basis of your calculations in Table 1.3, the highest opportunity cost for brushes in terms of combs is
(' 0.10 comb per brush.
(' 23 combs per brush .
___.(' 0.50 comb per brush.
('" 0.29 comb per brush.
This is a point where the production possibilities curve touches the axis. The opportunity costs are 0.10, 0.14, 0.25,
and 0.5, respectively, as we increase brush production.
Combination
J
K
L
1 :{
N
Multiple Choice
Number
of
Brushes
0
10
17
21
_,.
?"'.,,
Opportunity Cost
of Brushes in
Terms
of Combs
171 0 = 0.1 0
177 = 0.14
1..;. 4 = 0.25
1 ..;. 2 = 0.50
Difficulty : 3 Hard
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:.Jumber
of Combs
4
3
2
1
0
Opportunity Cost
of Combs in Terms
of Brushes
i
I
1071 = 10
771 = 7
4 + 1= 4
2+ 1=2
Learning Objective: 01 -02 What the
production-possibilities curve
represents.
9/17/2013
Page 36 of 40
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award :
53.
10.00
points
............ ,............... · T'ab16 1.3 shOws 'th9"hYPOihetiC8Ttrad9-off betwe9n dfffer8nt Combi·r;·aiionS of brushes ·a·n·a. COnlbs that might be produced
in a year with the limited capacity for Country X, ceteris paribus. Complete the table by calculating the required
opportunity costs for brushes and combs.
Combination
J
K
L
}\.{
N
Number
of
Bn1shes
0
10
17
21
23
Opportunity Cost
of Brush<;: s in
Terms
of Combs
Oppot1unity Cost
of Combs in Tenus
of Brushes
::.l'umber
of Combs
4
3
2
1
0
Table 1.3
Production Possibilities for Brushes and Combs
On the basis of your calculations in Table 1.3, the lowest opportunity cost for combs in terms of brushes is
r 10 brushes per comb.
_.r. 2 brushes per comb.
r
0.33 brush per comb.
r, 8.5 brushes per comb.
This is a point where the production possibilities curve touches the axis. For each combination, the opportunity costs
for 1 comb are 10, 7, 4, and 2.
Combination
J
K
L
1vf
N
Numbet·
of
Brushes
0
10
17
21
.,__,
....,
Opportunity Cost
of Brushes in
Terms
of Combs
::.l'umber
of Combs
1710 = 0.10
177 = 0.14
1..;. 4 = 0.25
1..;. 2 = 0.50
3
2
1
0
4
Opportunity Cost
of Combs in Tenus
of Brushes
I
I
I
i
I
10 7 1 = 10
771=7
4.;.1=4
2.;.1 = 2
Table 1.3 Answers
Multiple Choice
Difficulty: 3 Hard
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
9/17/2013
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......................................................... ..........................................
4.5
w
4.0
a:
w
3.5
1-
3.0
(!)
<(
~
z
-2
2.5
w
0
2.0
a:::
1.5
<(
(!)
1.0
.5
10
20
30
40
50
STUDY TIM E
Figut·e 1.8
Relating Grades and Hours Studied
Figure 1.8 suggests that
(' The law of increasing opportunity cost does not apply.
(' Resources can be perfectly adapted between study time and grade point average.
_,(' The relationship between study time and grade point average is first linear, then nonlinear.
I
The relationship between study time and grade point average is constant.
The function begins with a constant positive slope, and then it becomes nonconstant.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 01-02 What the
production-possibilities curve
represents.
9/17/2013
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awa rd:
10.00
55.
points
.............................
y
80 ............. - - - - - - - - - .... -
50
30
15
0
25
50
75
100
x·
Figu•·e 1.9
In Figure 1.9, the slope of the line between points K and Lis
r
1.25.
_.r
o.8o.
r o.75.
r o.so.
The slope is calculated as the change in the vertical variable divided by the change in the horizontal variable (0.80 =
20/25).
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 01 -01 How
scarcity creates opportu nity costs.
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" ' '"""'""'"'"·'"'"
y
80 - - - - - - - - - - - - .......
50
30
15
0
25
50
75
100
Figut·e 1.9
In Figure 1.9 the slope of the line is
r
r
r
_.r
Greater at point K than point L.
Equal to zero at all points.
The same at points J and K.
Greater at point M than point L.
The slope increases a's we move from left to right because the curve is getting steeper.
Multiple Choice
Difficulty: 2 Medium
Learning Objective: 01-01 How
scarcity creates opportunity costs.
awa rd :
57.
10.00
points
·····················i 1.1J5ii19.a9i.lils. ai1d.butter.procti.lciic:Jii.i>ossibiiities.ci.lrve··v.;ytil·i·;:;e:;:easii19'6i)i:>oiillili1Y·c:asi.·i> roduC:i n9.rTiore.and.rTiore ···
tanks
C.
Lowers the cost of each individual tank.
r
Can be done at a constant opportunity cost.
__.( Requires us to give up larger and larger amounts of butter per tank produced.
r
Is not possible due to scarcity.
This is because of the law of increasing opportunity cost.
Multiple Choice
Difficulty : 3 Hard
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Learning Objective: 01-01 How
scarcity creates opportunity costs.
9/17/2013
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58.
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points
····Greaierre9liiation.tocorredtile.imbafancesrii ·tiieecoi1omy:··as ·well .9overi1mentinteiVeniioiito··r;;aintaiiitull···· ·
employment, was associated primarily with the work of
___,(" John Maynard Keynes .
r
r
r
Adam Smith.
Karl Marx.
Ronald Reagan.
This forms the basis of the Keynesian school of economics.
Multiple Choice
Difficulty: 2 Medium
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Learning Objective: 01-04 How
market and government approaches
to economic problems differ.
9117/2013