Question 1

A movement from one point to another along the production possibilities curve would imply that:

Accepted Answer

A)   The labor force available to society has grown
B)   Productivity has increased over time
C)   Productivity has declined over time
D)   Society is producing a different combination of outputsE) B) and D)
F) A) and D)

Question 2

Which question is an illustration of a macroeconomic question?

Accepted Answer

A)   Is a corporation unresponsive to the demands of its customers?
B)   Is a consumer boycott an effective means of reducing a product's price?
C)   How will the government's budget deficit be affected by public infrastructure projects?
D)   Are oil companies ripping off consumers by charging exorbitantly high prices for gasoline?E) C) and D)
F) A) and D)

Question 3

A relationship illustrated by an upward-sloping graph means that an:

Accepted Answer

A)   Increase in the value of one variable causes the value of the other to decrease
B)   Decrease in the value of one variable causes the value of the other to decrease
C)   Decrease in the value of one variable causes the value of the other to increase
D)   Increase in the value of one variable causes no change in the other variableE) None of the above
F) A) and B)

Question 4

The purpose of the ceteris paribus assumption used in economic analysis is to:

Accepted Answer

A)   Avoid making normative statements
B)   Distinguish macroeconomics from microeconomics
C)   Make sure that all relevant factors are considered
D)   Focus on the effect of a single factor on a certain variableE) B) and C)
F) A) and B)

Question 5

The opportunity cost of constructing a new public highway is the:

Accepted Answer

A)   Money cost of hiring contractors and construction workers for the new highway
B)   Value of other goods and services that are sacrificed in order to construct the new highway
C)   Expected cost of constructing the new highway in a future year
D)   Value of shorter driving times and distances when the new highway is completedE) B) and C)
F) A) and D)

Question 6

Refer to the above graph. Which of the following movements would indicate a reduction in unemployment?

Accepted Answer

A)   From point C to point D
B)   From point F to point H
C)   From point E to point D
D)   From point D to point GE) B) and C)
F) A) and B)

Question 7

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities:  Refer to the above table. If the nation produces more and more tanks, the opportunity cost of each additional tank in terms of autos:

Accepted Answer

A)   Remains constant
B)   Falls
C)   Increases
D)   Cannot be measuredE) A) and B)
F) B) and C)

Question 8

Which of the following is not a factor of production?

Accepted Answer

A)   Money
B)   Labor
C)   Capital
D)   EntrepreneurE) All of the above
F) B) and D)

Question 9

After graduating from high school, Adam is thinking about going to college. The college tuition is $15,000 a year. Instead of going to college, Adam could take a full-time job that pays $25,000. What is Adam's opportunity cost of attending college for one year?

Accepted Answer

A)   $10,000
B)   $15,000
C)   $25,000
D)   $40,000E) A) and B)
F) A) and C)

Question 10

The slope of a graph relating two variables is -5. This indicates that as one variable decreases, the other variable also decreases.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is not correct?

Accepted Answer

A)   An increase in a nation's labor supply will cause its potential output to increase
B)   Economic growth can be illustrated by an expansion of a nation's production possibilities curve
C)   An increase in the quantity of a nation's resources will cause economic growth, but an increase in the quality of resources will not
D)   New technologies or new ways of producing output can cause a nation's production possibilities curve to shift outwardsE) B) and C)
F) B) and D)

Question 12

The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

Accepted Answer

A) True 
 B)False

Question 13

In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is .4. If income is $20,000, then consumption is:

Accepted Answer

A)   $8,000
B)   $9,000
C)   $10,000
D)   $11,000E) All of the above
F) B) and D)

Question 14

The statement in a newspaper that "consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year" is an example of:

Accepted Answer

A)   A normative economic statement
B)   A positive economic statement
C)   Microeconomic analysis
D)   Rational self-interestE) A) and B)
F) B) and D)

Question 15

When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.

Accepted Answer

A) True 
 B)False

Question 16

The best output or the optimal production of the nation is:

Accepted Answer

A)   A combination of products at the midpoint of the production possibilities curve
B)   A combination of products at the two endpoints of the production possibilities curve
C)   Determined by equalizing the marginal benefits and marginal costs of each product
D)   The production combination where the opportunity costs are minimizedE) All of the above
F) None of the above

Question 17

A point outside (to the right of)  the production possibilities curve of a nation:

Accepted Answer

A)   Is not attainable for this nation
B)   Is easily attainable for this nation
C)   Implies that there are unemployed resources in this nation
D)   Implies that this nation is using its resources fullyE) A) and D)
F) B) and C)

Question 18

From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

Accepted Answer

A)   Marginal cost of more insurance coverage is negative
B)   Marginal benefit of more insurance coverage is greater than zero
C)   Marginal benefit of more insurance coverage is greater than the marginal cost
D)   Marginal cost of more insurance coverage is equal to the payment for the extra coverageE) All of the above
F) B) and C)

Question 19

If A decreases, then B will also decrease. The graph relating the two variables A and B is:

Accepted Answer

A)   Vertical
B)   Downward-sloping
C)   Upward-sloping
D)   HorizontalE) A) and B)
F) A) and C)

Question 20

Refer to the above graph. All of the following development would allow a movement from point C to a point outside the production possibilities curve, except:

Accepted Answer

A)   An increase in the supply of resource
B)   An improvement in the quality of resources
C)   A reduction in unemployment of resources
D)   A technological advanceE) A) and C)
F) None of the above

Exam 1: Limits, Alternatives, and Choices

The purpose of the ceteris paribus assumption used in economic analysis is to:

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After graduating from high school, Adam is thinking about going to college. The college tuition is $15,000 a year. Instead of going to college, Adam could take a full-time job that pays $25,000. What is Adam's opportunity cost of attending college for one year?

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Which of the following statements is not correct?

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Refer to the above graph. Which of the following movements would indicate a reduction in unemployment?

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Which of the following is not a factor of production?

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A movement from one point to another along the production possibilities curve would imply that:

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A point outside (to the right of) the production possibilities curve of a nation:

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The economizing problem for individuals arises from the conflict between having relatively unlimited time and relatively limited jobs to do.

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From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

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Refer to the above graph. All of the following development would allow a movement from point C to a point outside the production possibilities curve, except:

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In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is .4. If income is $20,000, then consumption is:

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The best output or the optimal production of the nation is:

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The opportunity cost of constructing a new public highway is the:

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Which question is an illustration of a macroeconomic question?

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If A decreases, then B will also decrease. The graph relating the two variables A and B is:

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A nation can produce two products: tanks and autos. The table below is the nation's production possibilities: Refer to the above table. If the nation produces more and more tanks, the opportunity cost of each additional tank in terms of autos:

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The slope of a graph relating two variables is -5. This indicates that as one variable decreases, the other variable also decreases.

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The statement in a newspaper that "consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year" is an example of:

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A relationship illustrated by an upward-sloping graph means that an:

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When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.

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