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A person goes into a store and buys a computer for $2,210. In this case, price is acting as a
rationing device
The absence of value judgments is the essence of
positive economics
Amy's opportunity cost of going to the movies is
Choose one answer.



 
a. the price of the ticket.
 


 
b. zero, if she has a free pass.
 


 
c. the price of the ticket plus the value to Amy of what she would have chosen to do with her time had she not chosen to go to the movies.
 


 
d. both b and c


C
Choice is fundamentally a consequence of
scarcity
It usually takes less time to buy a six-pack of 7-Up, a loaf of bread, and a half-gallon of ice cream at a small convenience store (such as a 7-Eleven) than at a large, full-service grocery store. Which of the following persons is most likely to buy these items at a convenience store?
Choose one answer.



 
a. a person with high opportunity cost of time
 


 
b. a person with low opportunity cost of time
 


 
c. a person who is out of work
 


 
d. There is not enough information to answer the question.


A
Opportunity cost is the ____ alternative forfeited when a choice is made.
Most highly-valued
The possible combinations of two goods that can be produced in a certain period of time under the conditions of a given state of technology and fully employed resources
Production possibilities frontier (PPF)
straight-line PPF =
constant opportunity costs
bowed-outward PPF =
increasing opportunity costs (concave down)
The PPF separates the production possiblities of an economy into two regions:
1. an attainable region, which consists of the points on the PPF itself and all points below it
2. an unattainable region, which consists of the points above and beyond the PPF
The condition where the maximum output is produced with the given resources and technology
Productive efficient
The condition where less than the maximum output is produced with the given resources and technology
Productive inefficient
Implies that more of one good can be produced without any less of another being produced
Productive inefficient
What does economic growth refer to?
the increased productive capabilities of an economy
Two factors that affect economic growth:
1. an increase in the quantity of resources
2. an advance in technology
True/False. An increase in the quantity of resources makes a greater quantity of input possible.
False. An increase in teh quantity of resources makes a greater quantity of OUTPUT possible.
The body of skills and knowledge involved in teh use of resources and production
Technology
An advance in technology commonly increases the ability to produce _____ output with a fixed amount of resources or the ability t produce the same output with _____ resources.
More; fewer
The situation where someone can produce a good at lower opportunity cost than someone else can.
Comparative advantage
What does a bowed-outward PPF represent?
the law of increasing opportunity costs.

In a market economy prices

Choose one answer.



 
a. are useful in helping to ration goods and services.
 


 
b. convey information to the buyer.
 


 
c. provide incentives.
 


 
d. are necessary only when producers operate inefficiently
 


 
e. a, b and c
 




 
E
Country X has a high unemployment rate. It follows that country X is operating
below it's PPF
A movement from a point below the PPF  to a point on the PPF is
a movement from an inefficient point to an efficient point.
Points inside (or below) the PPF are
attainable but inefficient
Economists see a great similarity between nations: they all
face scarcity
Points below the production possibilities frontier (PPF) are
attainable
An increase in resources
shifts the PPF outward
The point where the PPF intersects the vertical axis is
attainable and efficient
Suppose the economy goes from a point on its PPF to a point directly "south" of it. This could be due to
a significant increase in the amount of unemployed resources in the economy.  
If Sean can bake bread at a lower cost than Jason, and Jason can produce paintings at a lower cost than Sean, it follows that
Sean has a comparative advantage in baking bread and Jason has a comparative advantage in producing paintings
A society which uses its resources efficiently
Choose one answer.



 
a. produces at a point on its PPF.
 


 
b. can produce more of one good only by giving up some of an other good.
 


 
c. cannot produce unlimited amounts of a good.
 


 
d. still has to make choices.
 


 
e. all of the above


E
Scarcity exists in
all countries of the world
The economy was at point A producing 100X and 200Y. It moved to point B where it produces 200X and 300Y. It follows that Choose one answer.   a. point A was a point below the economy's PPF.     b. the economy's PPF could have shifted outward and point A was a point on the economys old PPF.     c. the economy has moved from one point on its PPF to another point on the same PPF.     d. a or b     e. a or c
C
If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y, then what is the maximum units of good Y the economy can produce?
500
What is the reason for the law of increasing opportunity cost?
People have varying abilities and those with lower opportunity costs of producing a good produce it before people with higher opportunity costs produce it
Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at which there are 7 apples and 21 pears. If the economy is currently at point A, the opportunity cost of moving to point B is
3 apples
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing 1 pound of butter is
3 loaves of bread for Andy and 1 loaf of bread for John.
Efficiency implies that
it is impossible to obtain gains in one area without losses in another.
In the production possibilities framework, economic growth is depicted by
a shift outward of the frontier or to the right.
Transaction costs are
the costs associated with the time and effort needed to search out, negotiate, and consummate an exchange.
Which of the following (1) best defines an advance in technology and (2) most accurately describes the effect of an advance in technology?
Choose one answer.



 
a. An advance in technology commonly refers to the ability to produce more output with more resources; an advance in technology shifts the production possibilities frontier (PPF) outward.
 


 
b. An advance in technology commonly refers to the ability to produce more output with a fixed quantity of resources or the ability to produce the same output with a smaller quantity of resources; an advance in technology shifts the PPF inward.
 


 
c. An advance in technology commonly refers to the ability to produce more output with a fixed quantity of resources or the ability to produce the same output with a smaller quantity of resources; an advance in technology shifts the PPF outward.
 


 
d. none of the other options are correct


C
If consumers surplus is $40 and the price paid for the good is $50, then the maximum price a buyer is willing and able to pay for the good is
$90
A PPF is more likely to be a downward-sloping curve that is bowed outward (concave from below) than a downward-sloping straight line because most resources are
better suited for the production of some goods than others
Points outside (or beyond) the PPF are
unattainable
Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the countrys
PPF after the war is probably closer to the origin than its PPF before the war.
Which of the following statements is false?
Choose one answer.



 
a. If there are only two goods, guns and butter, over time it is possible to get more of both goods through economic growth.
 


 
b. If there are only two goods, guns and butter, it is possible to get more of both goods if the economy is currently operating at an inefficient point.
 


 
c. If there are only two goods, guns and butter, it is possible to get more of both goods if the economy is currently operating at an efficient point.
 


 
d. If there are only two goods, guns and butter, and the economy is currently operating at an efficient point, producing more of one means that less of the other will be produced.


C
An advance in technology can refer to the ability to produce
Choose one answer.



 
a. the same output with a smaller quantity of resources.
 


 
b. more output with a fixed quantity of resources.
 


 
c. more output with a greater quantity of resources.
 


 
d. both a and b
 


 
e. both b and c


D
A PPF can
shift inward or outward
If it is impossible to produce more of one good without getting less of another, then the economy is operating
efficiently
If the economy is operating on the production possibilities frontier (PPF), the economy is operating
Choose one answer.



 
a. inefficiently.
 


 
b. at full employment.
 


 
c. efficiently.
 


 
d. b and c
 


 
e. none of the above


D
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