1.ÊA production-possibilities curve indicates the:Ê
A.ÊCombinations of goods and services an economy is actually producing.
B.ÊMaximum combinations of goods and services an economy can produce given its available resources and technology.
C.ÊMaximum combinations of goods and services an economy can produce given unlimited resources.
D.ÊAverage combinations of goods and services an economy can produce given its available resources and technology.
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2.ÊThe production-possibilities curve illustrates:Ê
A.ÊThe limitations that exist because of scarce resources.
B.ÊThat there is no limit to what an economy can produce.
C.ÊThat there is no limit to the level of output.
D.ÊThe existence of unlimited wants and resources.
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3.ÊAccording to the law of increasing opportunity costs:Ê
A.ÊThe more one is willing to pay for resources, the larger will be the possible level of production.
B.ÊIncreasing the production of a particular good will cause the price of the good to rise.
C.ÊIn order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
D.ÊOnly by keeping production constant can rising prices be avoided.
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4.ÊIf the United States decides to convert automobile factories to tank production, as it did during World War II, but finds that some auto manufacturing facilities are not well suited to tank production, then:Ê
A.ÊThe production-possibilities curve between tanks and automobiles will appear as a straight line.
B.ÊThe production-possibilities curve between tanks and automobiles will shift outward.
C.ÊDecreasing opportunity costs will occur with greater automobile production.
D.ÊIncreasing opportunity costs will occur with greater tank production.
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5.ÊThe points on a production-possibilities curve show:Ê
A.ÊDesired output.
B.ÊActual output.
C.ÊPotential output.
D.ÊAll of the above.
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6.ÊWhich of the following is an example of government failure?Ê
A.ÊBureaucratic delays
B.ÊRequired use of pollution-control technology that is obsolete
C.ÊInefficient incentives
D.ÊBureaucratic delays, required use of pollution-control technologies that are obsolete, and inefficient incentives
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7.ÊIn Figure 1.6, at which of the following points would the opportunity cost of producing one more car be the lowest?Ê
A.ÊF
B.ÊE
C.ÊB
D.ÊC
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ÊThe following multiple-choice question requires critical thinking about In the News and World View articles that appeared in the text.
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8.ÊOne World View article is titled "Food Shortages Plague N. Korea." On a production-possibilities curve between private and public goods, a decrease in military spending in an effort to increase food production could be represented as:Ê
A.ÊA movement along the production-possibilities curve toward public goods.
B.ÊA movement along the production-possibilities curve toward private goods.
C.ÊA shift outward of the production-possibilities curve.
D.ÊA shift inward of the production-possibilities curve.
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9.ÊIn Figure 1.9, as you move up the curve from Point J toward Point M, the slope:Ê
A.ÊIncreases.
B.ÊRemains constant.
C.ÊDecreases.
D.ÊBecomes negative.
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10.ÊA linear function can be distinguished by:Ê
A.ÊThe continuous change in its slope.
B.ÊThe same slope throughout the line.
C.ÊThe changing relationship between the two variables.
D.ÊA shift in the function.
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11.ÊThe GDP is a measure of the market value of all final goods and services produced in the economy in a given time period.Ê
TrueÊÊÊÊFalse
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12.ÊThe standard of living rises when population growth exceeds economic growth.Ê
TrueÊÊÊÊFalse
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13.ÊThe relative decline in goods production means that we're producing fewer goods than in earlier decades.Ê
TrueÊÊÊÊFalse
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14.ÊIn economics, investment is the expenditure by businesses on new plant and equipment.Ê
TrueÊÊÊÊFalse
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15.ÊAll federal government spending is counted in GDP.Ê
TrueÊÊÊÊFalse
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1. B. Maximum combinations of goods and services an economy can produce given its available resources and technology.
To determine the answer to this question, you need to understand the concept of a production-possibilities curve. A production-possibilities curve is a graphical representation of the different combinations of goods and services that an economy can produce given its available resources and technology. It shows the trade-offs that a society faces when allocating its scarce resources to produce different goods and services. The curve represents the maximum output that can be achieved given the current resources and technology. Therefore, the correct answer is B.
2. A. The limitations that exist because of scarce resources.
To answer this question, you need to understand the purpose of a production-possibilities curve. A production-possibilities curve illustrates the various combinations of goods and services that an economy can produce given its available resources and technology. It shows the trade-offs and limitations that exist because of scarce resources. The curve demonstrates that producing more of one good requires sacrificing the production of another good. Therefore, the correct answer is A.
3. C. In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
To answer this question, you need to understand the law of increasing opportunity costs. The law of increasing opportunity costs states that as an economy produces more of a particular good, the opportunity cost of producing an additional unit of that good increases. This is because resources are not perfectly adaptable to producing different goods and services. Initially, the opportunity cost may be low, but as more resources are allocated to producing a particular good, the opportunity cost rises because those resources could have been used to produce alternative goods. Therefore, the correct answer is C.
4. D. Increasing opportunity costs will occur with greater tank production.
To answer this question, you need to understand the concept of opportunity cost and how it relates to the production-possibilities curve. When the United States converts automobile factories to tank production, it will face increasing opportunity costs. This means that as more resources are allocated to tank production, the opportunity cost of producing additional tanks will increase because the resources could have been used to produce automobiles instead. As a result, the production-possibilities curve between tanks and automobiles will show increasing opportunity costs. Therefore, the correct answer is D.
5. C. Potential output.
To determine the answer to this question, you need to understand the purpose of a production-possibilities curve. A production-possibilities curve shows the various combinations of goods and services that an economy can potentially produce given its available resources and technology. It represents the maximum output that can be achieved with the given resources. Therefore, the correct answer is C.
6. D. Bureaucratic delays, required use of pollution-control technologies that are obsolete, and inefficient incentives.
To answer this question, you need to understand the concept of government failure. Government failure refers to situations where government intervention leads to inefficient outcomes and unintended consequences. The examples given in the options, such as bureaucratic delays, requiring the use of obsolete pollution-control technologies, and inefficient incentives, are all examples of government failure. Therefore, the correct answer is D.
7. B. E.
To determine the answer to this question, you need to examine the production-possibilities curve in Figure 1.6 and understand the concept of opportunity cost. The opportunity cost of producing one more car is the slope of the production-possibilities curve at that point. In Figure 1.6, the slope is lowest at point E. Therefore, the correct answer is B.
8. A. A movement along the production-possibilities curve toward public goods.
To answer this question, you need to consider the scenario described in the article "Food Shortages Plague N. Korea" and its impact on the production-possibilities curve. Decreasing military spending to increase food production would result in a reallocation of resources from the production of private goods (military goods) to public goods (food). This reallocation represents a movement along the production-possibilities curve toward public goods. Therefore, the correct answer is A.
9. C. Decreases.
To determine the answer to this question, you need to understand the concept of slope on a production-possibilities curve. The slope of a production-possibilities curve represents the opportunity cost of producing one more unit of a good. As you move up the curve from Point J toward Point M, the slope of the curve decreases. This means that the opportunity cost of producing one more unit of the good decreases. Therefore, the correct answer is C.
10. B. The same slope throughout the line.
To determine the answer to this question, you need to understand the characteristics of a linear function. A linear function is characterized by having the same slope throughout the line. This means that the relationship between the two variables remains constant. Therefore, the correct answer is B.
11. False.
The definition provided in the question is correct, and the answer is True. The GDP is a measure of the market value of all final goods and services produced in the economy in a given time period.