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B.ÊRequired use of pollution-control technology that is obsolete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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