Quiz 2

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Economics

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May 26, 2024

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Quiz 2 1. Which one of the following concepts is illustrated by a production possibilities frontier? A) profit B) consumption C) investment D) property rights E) tradeoff 2. If Sam is producing at a point inside his production possibilities frontier, then he A) can increase production of both goods with zero opportunity cost. B) is fully using all his resources and allocating his resources to their best use. C) must be doing the best he can with limited resources. D) is unaffected by costs and technology. E) has a high opportunity cost of moving from this point. 3. A production possibilities frontier is negatively sloped because A) the quantity of a good purchased decreases as its price falls. B) opportunity cost of production increases as more of a good is produced. C) some resources are misallocated. D) there is too little capital in the economy. E) any choice along the PPF involves a tradeoff. 4. On a graph of a production possibilities frontier, opportunity cost is represented by A) a point on the horizontal axis. B) a point on the vertical axis. C) a ray through the origin. D) the slope of the production possibilities frontier. E) the x -axis intercept. 5. Production efficiency is achieved when A) the production possibilities frontier shifts outward at a constant pace. B) there are no tradeoffs. C) all resources are equally productive in all activities. D) resources are not equally productive in all activities. E) we produce goods and services at the lowest possible cost. 6. A tradeoff exists when A) we move from a point inside the PPF to a point on the PPF . B) we move from a point on the PPF to a point within the PPF . C) the PPF shifts outward. D) we move along the PPF . E) the PPF shifts inward. 7. A medical clinic employs 10 workers. Each worker can produce a maximum of either 2 units of medical services or 5 units of administrative services a day. The production possibilities

frontier of this firm shows A) increasing opportunity cost. B) decreasing opportunity cost. C) constant opportunity cost. D) zero opportunity cost. E) infinite opportunity cost. 8. The bowed-out (concave) shape of a production possibilities frontier illustrates A) the equal usefulness of resources in all activities. B) capital accumulation. C) technological change. D) increasing opportunity cost. E) decreasing opportunity cost. 9. If additional units of any good can be produced at a constant opportunity cost, the production possibilities frontier A) is bowed inward and negatively sloped. B) is bowed outward and negatively sloped. C) is positively sloped and linear. D) has an increasing positive slope. E) is linear and negatively sloped. 10. Use the figure below to answer the following questions. Refer to the production possibilities frontier in the above Figure. Suppose that 50 units of Y are produced. Then A) 7 units of X are being produced. B) 6 units of X can be produced if all resources are used and assigned to the task for which they are the best match. C) 9 units of X can be produced if all resources are used and assigned to the task for which they

are the best match. D) resources are not being fully utilized. E) 6 units of X are being produced. 11. As we increase production of X , we must give up production of larger and larger amounts of Y to produce each additional unit of X . Select the best statement. A) This illustrates increasing opportunity cost. B) As a result, we should not specialize in the production of X . C) The production possibilities frontier for X and Y is a straight line. D) Good Y will be more highly regarded by consumers than good X . E) We must be producing inside the production possibilities frontier. 12. When producing at a point of production efficiency, A) a firm is producing inside the production possibilities frontier. B) all wants are satisfied. C) the opportunity cost of producing goods other than those measured on the axes of the production possibilities frontier is zero. D) a tradeoff occurs. E) resources are either wasted or misallocated. 13. The Government of Canada promises to produce more defence goods without any decrease in the production of other goods. This promise is valid A) if Canada is producing at a point outside its PPF . B) if Canada is producing at a point on its PPF . C) if Canada is producing at a point inside its PPF . D) only if the PPF shifts rightward. E) only if technology advances or capital increases. 14. Sal sells hot dogs and hamburgers. The price of a hamburger is $5 and the price of a hotdog is $2. Sal's opportunity cost of producing 1 hamburger is 3 hot dogs. What is Sal's opportunity cost of producing 1 hot dog? A) 1/3 hamburger B) 3 hamburgers C) 1 hamburger, D) $5, E) $2 15. Which of the following is true regarding marginal benefit? I. The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II. Marginal benefit increases as more and more of a good is consumed. III. Marginal benefit is the maximum amount a person is willing to pay to obtain one more unit of a good. A) I only B) I and II C) I and III D) III only E) I, II, and III

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