PPC & Basic Concepts Review

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1. / Economics can best be described as the study of:
  1. how to profitably invest one's income in stocks and bonds.

  1. how to use scarce productive resources efficiently.

  1. how government policies affect businesses and labor.

  1. managing business enterprises for profit.

2. / As used in economics, the idea of scarce resources means that:
  1. mineral deposits are only available in finite amounts.

  1. resources are not so plentiful that all economic wants can be fulfilled.

  1. some resources are free while others have price tags on them.

  1. the quantities available of some resources exceed the demand for them.

3. / Which of the following is a land resource?
  1. a farmer

  1. an oil drilling rig

  1. a machine for detecting earthquakes.

  1. natural gas

4. / Which of the following is real capital?
  1. a pair of stockings

  1. a construction crane

  1. a savings account

  1. a share of IBM stock

5. / The production possibilities curve illustrates the basic principle that:
  1. the production of more of any one good will in time require smaller and smaller sacrifices of other goods.

  1. an economy will automatically obtain full employment of its resources.

  1. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

  1. an economy's capacity to produce increases in proportion to its population size.

6. / Which of the following will not produce an outward shift of the production possibilities curve?
  1. an upgrading of the quality of a nation's human resources

  1. the reduction of unemployment

  1. an increase in the quantity of a society's labor force

  1. the improvement of a society's technological knowledge

7. / Unemployment and/or productive inefficiencies:
  1. cause the production possibilities curve to shift outward.

  1. can exist at any point on a production possibilities curve.

  1. are both illustrated by a point outside the production possibilities curve.

  1. are both illustrated by a point inside the production possibilities curve.

8. / If the production possibilities curve is a straight line:
  1. the two products will sell at the same market prices.

  1. economic resources are perfectly shiftable between the production of the two products.

  1. the two products are equally important to consumers.

  1. equal quantities of the two products will be produced at each possible point on the curve.

9. / A production possibilities curve shows:
  1. that resources are unlimited.

  1. that people prefer one of the goods more than the other.

  1. the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources.

  1. combinations of capital and labor necessary to produce specific levels of output.

10. / Answer the next question(s) on the basis of the data given in the following production possibilities table:

Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:
  1. 4 units of capital goods.

  1. 2 units of capital goods.

  1. 3 units of capital goods.

  1. 1/3 of a unit of capital goods.

11. / Refer to the above table. As compared to production alternative D, the choice of alternative C would:
  1. tend to generate a more rapid growth rate.

  1. be unattainable.

  1. entail unemployment.

  1. tend to generate a slower growth rate.

12. / Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:
  1. is irrelevant because the economy is capable of producing a larger total output.

  1. will result in the maximum rate of growth available to this economy.

  1. would involve an inefficient use of the economy's scarce resources.

  1. is unobtainable in this economy.

13. / Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:
  1. achieve economic growth.

  1. use its resources more efficiently than the data in the table now indicate.

  1. allocate its available resources most efficiently among alternative uses.

  1. achieve the full employment of available resources.

14. / Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that:
  1. the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point.

  1. larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

  1. the production possibilities data would graph as a straight downsloping line.

  1. the economy's resources are presumed to be scarce.

15. / Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that:
  1. the economy was suffering from unemployment and/or the inefficient use of resources before the policy change.

  1. the economy's production possibilities curve has been shifted to the left as a result of the policy decision.

  1. this economy's production possibilities curve is convex (bowed inward) to the origin.

  1. the law of increasing opportunity costs does not apply in this society.

16. / Any point inside the production possibilities curve indicates:
  1. the realization of allocative efficiency.

  1. that resources are imperfectly shiftable among alternative uses.

  1. the presence of inflationary pressures.

  1. that more output could be produced with available resources.

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