2. Consider Figure 2.1. A less-than-full or inefficient use of resources is depicted by a. point B. b. point C. c. point E. d. point H. e. all of the above. 3. Consider Figure 2.1. Point F depicts a situation in which this economy a. is producing either DB of consumption goods or DH of capital goods. b. would have to incur an opportunity cost of AB consumption goods if it were to produce BD consumption goods. c. would have to incur an opportunity cost of KH capital goods if it were to produce DH capital goods. d. is using all of its resources fully and efficiently. e. is not using its technical knowledge to the maximum extent because the production of consumption goods lies below their maximum DA, while the production of capital goods lies below their maximum DK. 4. Consider Figure 2.1. Which of the following statements is correct? a. Output combination I implies that JK capital goods are being produced at an opportunity cost of AC consumption goods. b. Output combination I implies that DJ capital goods are being produced at an opportunity cost of AC consumption goods. c. Output combination L implies the maximum possible production of both consumption and capital goods. d. Output combination E represents a logical impossibility because it contradicts the definition of the production possibilities frontier. e. This graph illustrates constant opportunity costs all along the frontier. 5. Consider Figure 2.1. Which of the following statements is false? a. Starting at A and moving towards K, the increased production of capital goods is associated with ever-increasing opportunity costs. b. The increasing opportunity cost of an expanding production of capital goods is illustrated neatly in region FK because , starting at F, HJ=GI more capital goods require the sacrifice of FG consumption goods, while JK=HJ more capital goods require the larger sacrifice of IJ consumption goods. c. The increasing opportunity cost of an expanding production of capital goods is illustrated neatly in region AI because , starting at A, BF more capital goods require the sacrifice of AB consumption goods, while, starting a F, GI more capital goods require the larger sacrifice of FG consumption goods. d. The law of increasing opportunity costs can be explained by the fact that all resource units are not equally good at producing all types of goods. e. The law of increasing opportunity cost could also be illustrated by a production possibilities frontier that was convex from below; that is, bowed in towards point D in Figure 2.1. 6. A country's production possibilities frontier is known to exhibit constant opportunity cost. One output combination on the frontier is 10Y and 0X, another is 8Y and 2X. Therefore, it follows that a. combination 4Y and 6X is also on the frontier. b. combination 2Y and 9X is also on the frontier. c. combination 0Y and 9X is also on the frontier. d. combination 6Y and 4X is unattainable. e. combination 6Y and 4X is inefficient. 7. A country's production possibilities frontier is known to exhibit increasing opportunity cost. One output combination on the frontier is 10Y and 0X, another is 8Y and 2X. Therefore, it follows that a. combination 6Y and 6X is also on the frontier. b. combination 6Y and 9X is also on the frontier. c. combination 6Y and 3X may be on the frontier. d. combination 6Y and 6X is efficient. e. both (a) and (d) are true. 8. If, under conditions of increasing opportunity cost, the production of a 100th unit of capital goods were associated with a sacrifice of 20 units of consumption goods, then a. human welfare could be raised by producing fewer capital goods and more consumption goods. b. human welfare could be raised by producing more capital goods and fewer consumption goods. c. the production of a 50th unit of capital goods would be associated with a sacrifice of fewer than 20 units of consumption goods. d. the production of a 200th unit of capital goods would be associated with a sacrifice of fewer than 20 units of consumption goods. e. both (a) and (c) would hold. 9. If, under conditions of decreasing opportunity costs, the production of a 100th unit of consumption goods were associated with a sacrifice of 20 units of capital goods, then a. the opportunity cost for producing a 90th unit of consumption goods would equal 18 units of capital goods. b. the opportunity cost for producing a 90th unit of consumption goods might equal 18 units of capital goods. c. the opportunity cost for producing a 110th unit of consumption goods would equal 18 units of capital goods. d. the opportunity cost for producing a 110th unit of consumption goods might equal 18 units of capital goods. e. productive efficiency would clearly require the production of more consumption goods at the expense of capital goods. 10. Country A produces twice as many consumption goods as country B. It follows that a. country A's production possibilities frontier lies farther to the right than country B's. b. country A's production possibilities frontier may well be identical to B's. c. country A's production possibilities frontier must exhibit decreasing opportunity costs. d. country A's population is larger. e. country A's per capita output is larger. 11. Let a war decimate a country's people, natural resources, and capital stock. Along with some people, technical knowledge is lost. We would expect this country's production possibilities frontier a. to be unaffected. b. to shift to the left. c. to shift to the right. d. to become a straight line. e. to become convex from below. 12. An economy's position changes from one point on its production possibilities frontier to another point on the same frontier. This move represents a. a move from one inefficient point to another. b. a move from efficiency to inefficiency. c a move from efficiency to efficiency. d. a move from inefficiency to efficiency. e. economic growth. 13. A country's production possibilities frontier shifts to the right. This implies which of the following? a. An increase in the quantity of labor resources. b. An increase in the quantity of natural resources or land. c. An increase in the quantity of capital resources. d. An advance in technology. e. Any one of the above or a combination of these factors. 14. An economy moves from output combination A (producing 200Y and 100X) to combination B (producing 200Y and 150X). If the production possibilities frontier has not shifted, this implies a. a move from inefficiency to efficiency. b. a move from efficiency to efficiency. c. a move from inefficiency to inefficiency, perhaps. d. a move from efficiency to inefficiency. e. any one of the above. 15. An economy moves from a point on this year's production possibilities frontier to a point above it next year. This implies a. that inefficiency must have been turned into efficiency. b. that efficiency must have been turned into greater efficiency. c. that unemployment must have been eliminated. d. that economic growth must have occurred. e. all of the above. 16. Which of the following is true about economic growth? a. The concept refers to an economy's ability to produce more output with a fixed amount of resources or its ability to produce the same output with fewer resources. b. It changes the production possibilities frontier from concave downward to convex downward. c. It can be illustrated by a leftward shift of the production possibilities frontier. d. It refers to an increase in the production capabilities of an economy due to an increase in the quantity of resources or an advance in technology. e. All of the preceding statements are true. 17. The condition where the maximum output is produced with given resources and technology a. is referred to as productive efficiency. b. implies the possibility of output gains in one area without losses in another. c. implies that opportunity cost has been driven to zero. d. implies (b) as well as (c). e. could be illustrated by a point beyond the production possibilities frontier. 18. The condition where less than the maximum output is produced with given resources and technology a. is referred to as productive inefficiency. b. is neatly illustrated by every single point on the production possibilities frontier. c. causes the production possibilities frontier to shift inward or to the left. d. is illustrated by all the points lying to the right and above the production possibilities frontier. e. implies the existence of (quite unnecessary) increasing opportunity cost. 19. The efficiency criterion is used by economists a. to promote advances in technology and, therefore, economic growth. b. to address the question of whether an alternative arrangement of resources or goods exists that can make at least one person better off without making anyone else worse off. c. each year to map the country's production possibilities frontier. d. to determine what goods will be produced, how they will be produced, and for whom they will be produced. e. in all of the above ways. 20. Using the efficiency criterion, an economist is likely to ask: a. Can one person be made better off at the expense of another person? b. Can one person be made better off without hurting anyone else? c. Can everyone be made better off at the same time? d. Should someone be made better off? e. Either (b) or (c).
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