Question 1

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good:
A.is constant.
B.is measured in dollar terms.
C.is measured by the amount of the other good that must be given up.
D.usually decreases.

Accepted Answer

is measured by the amount of the other good that must be given up.

Question 2

(Figure: Guns and Butter) Look at the figure Guns and Butter.This production possibility frontier is: 
A.bowed out from the origin because of increasing opportunity
B.costs.bowed in toward the origin because of increasing
C.opportunity costs.bowed in toward the origin because of
D.constant costs of guns and butter.linear because of constant costs.

Accepted Answer

bowed out from the origin because of increasing opportunity

Question 3

A simplified representation that is used to study a real situation is called:
A)a model.
B)a production possibility frontier.
C)an assumption.
D)a trade-off.

Accepted Answer

A model is a simplified representation that is used to study a real situation, allowing for better understanding or analysis of the situation. A production possibility frontier is a graphical representation of the possible combinations of two goods that an economy can produce, assuming all resources are used efficiently. An assumption is a statement that is accepted as true without proof or evidence. A trade-off is a situation in which a person, group, or company must choose between two or more options, each involving advantages and disadvantages. Therefore, the best choice for the simplified representation used to study a real situation is a model.

Question 4

The models used in economics:
A.are usually limited to variables that are directly related.
B.are essentially not reliable because they are not testable in the real world.
C.are of necessity unrealistic and not related to the real world.
D.emphasize basic relationships by abstracting from complexities in the everyday world.

Accepted Answer

The answer of The models used in economics:
A.are usually limited...

Question 5

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If an economy is producing at alternative W, the opportunity cost of producing at X is unit(s) of consumer goods per period. 
A.0
B.1
C.4
D.18

Accepted Answer

The answer of  (Table: Production Possibilities Schedule II) Look...

Question 6

(Figure: Guns and Butter) Look at the figure Guns and Butter.If the economy were operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce 18 pounds of butter: 
A.indicates you can have more butter and guns simultaneously.
B.makes it clear that this economy experiences decreasing opportunity costs.
C.involves a loss of 8 guns per period.
D.involves a loss of 4 guns per period.

Accepted Answer

The answer of   (Figure: Guns and Butter) Look...

Question 7

Economic models are:
A.created and used to duplicate reality.
B.useless if they are simple.
C.made generally of wood, plastic, and/or metal.
D.often useful in forming economic policy.

Accepted Answer

The answer of Economic models are:
A.created and used to duplicate...

Question 8

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is units of consumer goods per period.
A.0
B.6
C.8
D.14

Accepted Answer

To find the opportunity cost of producing at Y instead of X, we need to look at the difference in the number of consumer goods produced when shifting from X to Y. Moving from X to Y would require producing 6 fewer units of capital goods but producing 6 more units of consumer goods. Therefore, the opportunity cost of producing at Y instead of X is 6 units of consumer goods per period. Therefore, the best choice is B.

Question 9

(Table: Production Possibilities Schedule II) Look at the figure Production Possibilities Schedule II.The production of 14 units of consumer goods and 1 unit of capital goods per period would:
A.result in full employment.result in no unused resources.
B.result in some unused or inefficiently used resources.
C.increase economic growth.

Accepted Answer

The answer of (Table: Production Possibilities Schedule II) Look at...

Question 10

(Figure: Guns and Butter) Look at the figure Guns and Butter.Suppose the economy produced
8 guns and 12 pounds of butter per period. 
A.This is a possible choice but is inefficient.
B.The notion of increasing opportunity cost is invalidated.
C.The economy is still efficient but has made a decision not to buy as much as it could.
D.Something must be done to reduce the amount of employment.

Accepted Answer

The answer of   (Figure: Guns and Butter) Look...

Question 11

Figure: Guns and Butter
(Figure: Guns and Butter) Look at the figure Guns and Butter.The combination of guns and butter at point H:
A.can be attained but would cost too much.
B.cannot be attained, given the level of technology and the factors of production available.
C.has no meaning, since it does not relate to the preferences of
D.consumers.is attainable but would increase unemployment.

Accepted Answer

The answer of Figure: Guns and Butter
(Figure: Guns and Butter)...

Question 12

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:
A.a zero slope.
B.a constant, negative slope.
C.an increasing, negative slope.
D.a decreasing, negative slope.

Accepted Answer

The answer of If an economy has to sacrifice only...

Question 13

(Figure: Guns and Butter) Look at the figure Guns and Butter.On this figure, points A, B, E, and
F: 
A.indicate combinations of guns and butter that society can produce using all of its factors efficiently.
B.show that the opportunity cost of more guns increases but that of more butter decreases.
C.indicate that society wants butter more than it wants guns.
D.indicate constant costs for guns and increasing costs for butter.

Accepted Answer

The answer of  (Figure: Guns and Butter) Look at...

Question 14

The production possibility frontier illustrates that:
A)the economy will automatically end up at full employment.
B)an economy's productive capacity increases proportionally with its population.
C)if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
D)economic production possibilities have no limit.

Accepted Answer

The production possibility frontier illustrates the maximum amount of two goods that can be produced with the given resources and technology. It shows that in order to produce more of one good, some amount of the other good must be given up. This is the concept of opportunity cost, and it arises because resources are scarce and must be allocated efficiently. The PPF does not imply that the economy will automatically end up at full employment (A) or that an economy's productive capacity increases proportionally with its population (B). It also does not imply that economic production possibilities have no limit (D) as there are always finite resources and technological constraints on production.

Question 15

The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of:
A.increasing opportunity cost.
B.decreasing opportunity cost.
C.constant opportunity cost.
D.concave opportunity cost.

Accepted Answer

The answer of The fact that a society's production possibility...

Question 16

If an economy has to sacrifice increasing amounts of good X for each unit of good Y
produced, then its production possibility frontier is:
A.bowed out from the origin.
B.bowed in toward the origin.
C.a straight line.
D.a vertical line.

Accepted Answer

The answer of If an economy has to sacrifice increasing...

Question 17

The models that economists construct:
A)usually make simplifying assumptions.
B)often rely on physical constructs, such as those used by architects.
C)rarely use mathematical equations or graphs.
D)attempt to replicate the real world.

Accepted Answer

Economists often make simplifying assumptions in their models to make them more manageable and to isolate certain variables for analysis. While mathematical equations and graphs are often used in these models, they are not physical constructs like those used by architects. It is also important to note that economists do not necessarily aim to replicate the real world exactly, but rather to create a simplified version that allows for analysis and prediction. Economists often simplify the real world into models in order to better understand and analyze economic phenomena. These models frequently make assumptions and other simplifications in order to make them more tractable and easier to analyze.

Question 18

The importance of an economic model is that it allows us to:
A)build a complex and accurate model of the economy.
B)build an accurate mathematical model of the economy.
C)focus on the effects of only one change at a time.
D)avoid opportunity costs.

Accepted Answer

Economic models allow us to isolate and focus on the effects of only one change at a time, which helps us understand the complex relationships and interactions within the economy. This approach allows economists to test different scenarios and policies without having to account for all the many variables that impact the economy in real life. This simplification is crucial for developing and understanding economic theories and hypotheses. Economic models allow us to isolate the effects of a single variable or change, which can be difficult to do without modeling. This helps us understand cause-and-effect relationships and make predictions about the likely outcomes of different policy decisions. While economic models may not capture the full complexity of the economy, they can inform decision-making and provide insights into how different factors interact.

Question 19

When building a model, economists:
A)simplify reality in order to highlight what really matters.
B)attempt to duplicate reality in all of its complexity.
C)ignore the facts and instead try to determine what the facts should
D)be.are careful to avoid the scientific method.

Accepted Answer

Economists simplify reality in their models because the real world is too complex to analyze and understand fully. By simplifying the model, they are able to highlight the key variables that matter in the analysis.

Question 20

A production possibility frontier that is a straight line sloping down from left to right would suggest that:
A)more of both goods could be produced moving along the
B)frontier.the two products must have the same price.
C)the opportunity costs of the products are constant.
D)there are no opportunity costs.

Accepted Answer

A straight line sloping down from left to right suggests that the opportunity costs of the two products are constant. This means that as the production of one good increases, an equal amount of the other good must be given up. For example, if a country produces more cars, it must forego the production of a certain amount of refrigerators, and vice versa. The fact that the PPF is a straight line means that the opportunity cost of producing one good in terms of the other remains constant at all levels of production.

Quiz 1: First Principles

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: A.is constant. B.is measured in dollar terms. C.is measured by the amount of the other good that must be given up. D.usually decreases.

A simplified representation that is used to study a real situation is called:

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If an economy is producing at alternative W, the opportunity cost of producing at X is unit(s) of consumer goods per period. A.0 B.1 C.4 D.18

Economic models are: A.created and used to duplicate reality. B.useless if they are simple. C.made generally of wood, plastic, and/or metal. D.often useful in forming economic policy.

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is units of consumer goods per period. A.0 B.6 C.8 D.14

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has: A.a zero slope. B.a constant, negative slope. C.an increasing, negative slope. D.a decreasing, negative slope.

The production possibility frontier illustrates that:

The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of: A.increasing opportunity cost. B.decreasing opportunity cost. C.constant opportunity cost. D.concave opportunity cost.

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is: A.bowed out from the origin. B.bowed in toward the origin. C.a straight line. D.a vertical line.

The models that economists construct:

The importance of an economic model is that it allows us to:

When building a model, economists:

A production possibility frontier that is a straight line sloping down from left to right would suggest that: