Chapter 02 The Econ Problem Answers Part 2

CH 02 - The Econ Problem Use the table below to answer the following questions. Table 2.1.3 Production possibilities for a society that produces only two goods  hockey sticks and maple leaves. Possibility A B C Units of Hockey Sticks 3 2 0 Units of Maple Leaves 0 3 9 55) Refer to Table 2.1.3. In moving from combination C to combination B , the opportunity cost of producing one additional hockey stick is A) 2 maple leaves. B) 1/6 maple leaves. C) 1/2 maple leaves. D) 6 maple leaves. E) 3 maple leaves. 56) Refer to Table 2.1.3. According to this production possibilities frontier A) a combination of 3 hockey sticks and 9 maple leaves would not employ all resources. B) the opportunity cost of producing hockey sticks increases as more hockey sticks are produced. C) resources are equally productive in all activities. D) a combination of 3 hockey sticks and 9 maple leaves is attainable. E) the opportunity cost of producing hockey sticks decreases as more hockey sticks are produced. Use the table below to answer the following question. Table 2.1.4 Consider the following production possibilities for A. Student for the typical week: Possibility a b c d e Beer 16 cases 12 cases 9 cases 5 cases 0 cases Pizza 0 6 11 14 15 57) Refer to Table 2.1.4. Complete the following sentence. The production possibility frontier in the table above shows A) increasing opportunity cost. B) constant opportunity cost. C) under - utilization of resources. D) learning- by- doing. E) decreasing opportunity cost. 58) The slope of the production possibilities frontier curve indicates A) comparative advantage. B) preferences. C) marginal benefit. D) opportunity cost. E) absolute advantage. 10 CH 02 - The Econ Problem 59) As we move down the production possibilities frontier opportunity cost A) increases. B) decreases but at an increasing rate. C) remains constant. D) initially decreases, then increases. E) decreases. Use the figure below to answer the following questions. Figure 2.1.4 60) Refer to the production possibilities frontier in Figure 2.1.4. Which point is unattainable? A) a . B) b . C) c. D) d . E) e. 11 CH 02 - The Econ Problem Use the figure below to answer the following question. Figure 2.1.5 61) The graph in Figure 2.1.5 shows Yucatan's PPF for food and sunscreen. Yucatan faces ________ opportunity cost of food and ________ opportunity of sunscreen, which can be seen by the shape of the PPF. A) an increasing; a decreasing B) a decreasing; a decreasing C) a constant; a constant D) a decreasing; an increasing E) an increasing; an increasing 12 CH 02 - The Econ Problem Use the figure below to answer the following question. Figure 2.1.6 62) Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food. Point A is ________ and point B is ________. This PPF ________ illustrate scarcity because ________. A) attainable; unattainable; does; the firm cannot produce points outside the frontier and as the firm moves along the PPF, it cannot produce more dog biscuits without producing less cat food B) unattainable; attainable; does; because the firm cannot attain the points outside the frontier C) unattainable; attainable; does not; the firm can produce any quantity it wants if it is willing to pay a high enough price D) attainable; unattainable; does not; it is downward sloping E) attainable; unattainable; does not; the firm can produce any quantity it wants if it is willing to pay a high enough price 63) Complete the following sentence. Marginal cost A) always equals marginal benefit. B) is always greater then marginal benefit. C) is unrelated to the production possibilities frontier. D) is the opportunity cost of producing one more unit of a good or service. E) remains constant. 64) The quantity of shoes produced is measured along the x -axis of a bowed outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis. As you move down towards the right along the production possibilities frontier, the marginal cost of A) a shirt increases. B) a pair of shoes decreases. C) a pair of shoes increases. D) a shirt decreases. E) a pair of shoes and a shirt is equal at the midpoint between the x -axis and the y -axis. 13 CH 02 - The Econ Problem 65) 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 and II. B) I and III. C) I only. D) I, II, and III. E) III only. 66) To describe preferences, economists use the concept of A) scarcity. B) marginal cost. C) opportunity cost. D) marginal benefit. E) none of the above. 67) Complete the following sentence. As you consume more and more of a good, A) marginal benefit increases or decreases depending on where you are on the production possibilities frontier. B) marginal benefit always equals marginal cost. C) marginal benefit decreases. D) marginal benefit increases. E) the price of the good falls. 68) The marginal benefit curve for a good A) is upward -sloping. B) shows the most a consumer is willing to pay for one more unit of that good. C) is bowed outward. D) shows the benefit a firm receives from producing one more unit of that good. E) none of the above. 14 CH 02 - The Econ Problem Use the figure below to answer the following questions. Figure 2.2.1 69) In Figure 2.2.1, the curve labeled B shows A) that the benefits of producing more pop is greater than the benefits of producing more bicycles. B) the bottles of pop that people must forgo to get another bicycle. C) that the benefits of producing more bicycles is greater than the benefits of producing more pop. D) the bicycles that people are willing to forgo to get another bottle of pop. E) the bottles of pop that people are willing to forgo to get another bicycle. 70) In Figure 2.2.1, when 2,000 bicycles are produced each month A) the marginal benefit from another bicycle is greater than the marginal cost of another bicycle. B) more bicycles must be produced to reach the efficient level of output. C) fewer bicycles must be produced to reach the efficient level of output. D) the economy is efficient at this level of production of bicycles. E) both A and B. 71) In Figure 2.2.1, the curve labelled A is the ________ curve and the curve labelled B is the ________ curve. A) marginal benefit; trade B) production possibilities; trade C) marginal cost; trade D) marginal benefit; marginal cost E) marginal cost; marginal benefit 72) In Figure 2.2.1, when 4,000 bicycles are produced each month A) more bicycles must be produced to reach the efficient level of output. B) the economy is very efficient at this level of production of bicycles. C) fewer bicycles must be produced to reach the efficient level of output. D) the marginal benefit from another bicycle is greater than the marginal cost of another bicycle. E) both A and B. 73) A marginal benefit curve measures A) comparative advantage. B) willingness to pay. C) absolute advantage. D) expenditure. E) opportunity cost. 15 CH 02 - The Econ Problem 74) Allocative efficiency refers to a situation where A) goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. B) opportunity costs are equal. C) we cannot produce more of any one good without giving up some other good. D) opportunity cost is zero. E) none of the above. 75) As production of food increases, marginal benefit from food A) decreases and marginal cost increases. B) decreases and marginal cost decreases. C) decreases and marginal cost is zero. D) increases and marginal cost decreases. E) increases and marginal cost increases. 76) Suppose the production possibilities frontier for skirts and pants is a straight line. As the production of skirts increases, the marginal benefit of skirts A) decreases and marginal cost increases. B) increases and marginal cost is constant. C) decreases and marginal cost is constant. D) is constant and marginal cost decreases. E) decreases and marginal cost decreases. 77) With allocative efficiency, for each good produced, A) marginal cost is at its minimum. B) marginal benefit equals marginal cost. C) marginal benefit exceeds marginal cost by as much as possible. D) marginal cost exceeds marginal benefit by as much as possible. E) marginal benefit is at its maximum. 78) Marginal benefit from a good or service is the benefit received from consuming ________. It is measured by the most that people are willing to pay for ________. A) goods that you prefer; an additional unit of it B) goods that you prefer; more of it C) one more unit of it; more of it D) as much as is available; the total amount consumed E) one more unit of it; an additional unit of it 16 CH 02 - The Econ Problem Use the table below to answer the following questions. Table 2.2.1 Ethanol (barrels per day) 70 64 54 40 22 0 and and and and and and Food crops (tonnes per day) 0 1 2 3 4 5 79) Refer to Table 2.2.1. Marginal benefit from food crops A) cannot be calculated from the table. B) equals 70 barrels of ethanol. C) remains constant as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day. D) equals the marginal cost of food crops. E) increases as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day. 80) A technological improvement is represented by A) a point inside the production possibilities frontier. B) a movement from a point inside the production possibilities frontier to a point on the production possibilities frontier. C) an outward shift of the production possibilities frontier. D) a point outside the production possibilities frontier. E) a movement along the production possibilities frontier. 81) In general, if country A is accumulating capital at a faster rate than country B , then country A A) is using a larger proportion of resources to produce consumption goods. B) will soon have a comparative advantage in the production of most goods. C) will have more unemployment than country B. D) will have a production possibilities frontier that is shifting out faster than country B's. E) will have a higher rate of inflation than country B. 82) The principal reason that production possibilities have grown more rapidly in Hong Kong than in Canada over the last 40 years is because A) Hong Kong has fewer workers. B) of cheap Hong Kong labour. C) Hong Kong has devoted a larger proportion of its resources to capital accumulation. D) Hong Kong has more natural resources. E) of foreign aid to Hong Kong. 83) Which one of the following would cause a production possibilities frontier to shift outward? A) An increase in the stock of capital. B) A decrease in the population. C) Bad weather. D) An increase in the production of consumption goods. E) A decision to fully utilize unemployed resources. 17 CH 02 - The Econ Problem 84) The development of new goods and better ways of producing goods and services is A) technological change. B) allocative efficiency. C) the big tradeoff. D) capital accumulation. E) none of the above. 85) The growth of capital resources, including human capital is A) technological change. B) opportunity cost. C) capital accumulation. D) depreciation. E) none of the above. 86) Which one of the following would likely shift a production possibilities frontier inward? A) A drought. B) A decrease in the price of natural resources. C) Technological change. D) All of the above E) None of the above, because production possibility frontiers do not shift inward. Use the figure below to answer the following questions. Figure 2.3.1 87) Refer to the production possibilities frontier in Figure 2.3.1. The production possibilities frontier will shift rightward most rapidly if current production is at A) A. B) B. C) C. D) D. E) E. 88) A production possibilities frontier will shift outward for all of the following reasons except A) opportunity cost is increasing. B) an increase in the stock of capital. C) an increase in the labour force. D) a technological improvement. E) none of the above. 18