Question 1

Economics may best be defined as:

Accepted Answer

A)  the interaction between macro and micro considerations.
B)  the study of the behaviour of people and institutions in the production, distribution, and consumption of scarce goods.
C)  the empirical testing of value judgments through the use of induction and deduction.
D)  the use of policy to refute facts and hypotheses.E) B) and C)
F) A) and D)

Question 2

The basic purpose of the "other things equal" assumption is to:

Accepted Answer

A)  allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.
B)  allow one to focus upon micro variables by ignoring macro variables.
C)  allow one to focus upon macro variables by ignoring micro variables.
D)  determine whether X causes Y or vice versa.E) B) and D)
F) A) and B)

Question 3

Refer to the above diagram.This production possibilities curve is:

Accepted Answer

A)  convex to the origin because opportunity costs are constant.
B)  linear because opportunity costs are constant.
C)  concave to the origin because of increasing opportunity costs.
D)  convex to the origin because of increasing opportunity costs.E) A) and D)
F) B) and C)

Question 4

The production possibilities curve is bowed out from the origin because:

Accepted Answer

A)  marginal benefits are equal.
B)  marginal benefits decrease.
C)  marginal benefits are unpredictable.
D)  marginal benefits decrease and then increase in value.E) B) and C)
F) B) and D)

Question 5

1. B) is Q2. C) is Q3. D) is greater than Q3." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram for athletic shoes.The optimal output of shoes:

Accepted Answer

A)  is Q1.
B)  is Q2.
C)  is Q3.
D)  is greater than Q3.E) A) and B)
F) B) and C)

Question 6

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, this means that it:

Accepted Answer

A)  can only produce more consumer goods by producing fewer capital goods.
B)  can only produce more capital goods by producing fewer consumer goods.
C)  can produce more of both consumer goods and capital goods by using its resources more efficiently.
D)  must improve its technology to produce more output.E) A) and B)
F) A) and C)

Question 7

Which of the following is a microeconomic statement?

Accepted Answer

A)  The real domestic output increased by 2.5 percent last year.
B)  Unemployment was 8.3 percent of the labour force last year.
C)  The price of personal computers declined last year.
D)  The general price level increased by 4 percent last year.E) C) and D)
F) A) and B)

Question 8

A country can achieve some combination of goods outside its production possibilities curve by:

Accepted Answer

A)  idling some of its resources.
B)  specializing and engaging in international trade.
C)  buying the debt (bonds and stocks)  of foreign nations.
D)  producing more consumption goods and fewer capital goods.E) None of the above
F) B) and D)

Question 9

The above data suggest that:

Accepted Answer

A)  a policy of tax reduction will increase consumption.
B)  a policy of tax increases will increase consumption.
C)  tax changes will have no impact on consumption.
D)  after-tax income should be lowered to increase consumption.E) A) and C)
F) All of the above

Question 10

The concept of opportunity cost:

Accepted Answer

A)  is irrelevant in socialistic economies because of central planning.
B)  suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.
C)  is irrelevant if the production possibilities curve is shifting to the right.
D)  suggests that insatiable wants can be fulfilled.E) A) and B)
F) C) and D)

Question 11

In moving along a given budget line:

Accepted Answer

A)  the prices of both products and money income are assumed to be constant.
B)  each point on the line will be equally satisfactory to consumers.
C)  money income varies, but the prices of the two goods are constant.
D)  the prices of both products are assumed to vary, but money income is constant.E) All of the above
F) A) and C)

Question 12

A point inside the production possibilities curve is:

Accepted Answer

A)  attainable and the economy is efficient.
B)  attainable, but the economy is inefficient.
C)  unattainable, but the economy is inefficient.
D)  unattainable and the economy is efficient.E) All of the above
F) A) and B)

Question 13

In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is.4.If income is $20,000, then consumption is:

Accepted Answer

A)  $8,000
B)  $9,000
C)  $10,000
D)  $11,000E) B) and C)
F) A) and B)

Question 14

Of the countries listed in Image 1.1, Which of the following countries had the highest average income in 2015?

Accepted Answer

A)  Norway
B)  Switzerland
C)  United States
D)  CanadaE) C) and D)
F) All of the above

Question 15

The production possibilities curve represents:

Accepted Answer

A)  the maximum amount of labour and capital available for production.
B)  combinations of goods and services among which consumers are indifferent.
C)  maximum combinations of products available with fixed resources and technology.
D)  the maximum rate of growth of capital and labour in an economy.E) C) and D)
F) A) and B)

Question 16

The production possibilities curve shows various combinations of two products which an economy can produce when achieving full employment and productive efficiency.

Accepted Answer

A) True 
 B)False

Question 17

s for quantity supplied and P for price, which of the following equations correctly states the supply of this product? A) P = 4 + .2Qs. B) P = 60/Qs. C) P = 10Qs - 2P. D) P = 2 + .2Qs." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.Using Qs for quantity supplied and P for price, which of the following equations correctly states the supply of this product?

Accepted Answer

A)  P = 4 + .2Qs.
B)  P = 60/Qs.
C)  P = 10Qs - 2P.
D)  P = 2 + .2Qs.E) All of the above
F) C) and D)

Question 18

Recessions are typically characterised by points:

Accepted Answer

A)  inside the production possibilities curve.
B)  outside the production possibilities curve.
C)  on the production possibilities curve.
D)  that are not attainable on the production possibilities curve.E) C) and D)
F) B) and C)

Question 19

1 to PP2 A) immigration of skilled workers into the economy B) worsening of the AIDS epidemic C) an increase in consumer prices D) a reduction in the age of retirement." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.Which one of the following would shift the production possibilities curve from PP1 to PP2

Accepted Answer

A)  immigration of skilled workers into the economy
B)  worsening of the AIDS epidemic
C)  an increase in consumer prices
D)  a reduction in the age of retirement.E) B) and D)
F) C) and D)

Question 20

The construction of a production possibilities curve assumes:

Accepted Answer

A)  the quantities of all resources are fixed.
B)  technology is fixed.
C)  full employment and full production are being realized.
D)  all of the above.E) C) and D)
F) B) and C)

Exam 1: Part B: Limits, Alternatives, and Choices

Of the countries listed in Image 1.1, Which of the following countries had the highest average income in 2015?

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A country can achieve some combination of goods outside its production possibilities curve by:

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Refer to the above diagram.This production possibilities curve is:

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Economics may best be defined as:

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A point inside the production possibilities curve is:

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The concept of opportunity cost:

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Which of the following is a microeconomic statement?

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The above data suggest that:

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Recessions are typically characterised by points:

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The production possibilities curve represents:

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The construction of a production possibilities curve assumes:

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Refer to the above diagram for athletic shoes.The optimal output of shoes:

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Refer to the above graph.Using Qs for quantity supplied and P for price, which of the following equations correctly states the supply of this product?

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Refer to the above diagram.Which one of the following would shift the production possibilities curve from PP1 to PP2

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The production possibilities curve shows various combinations of two products which an economy can produce when achieving full employment and productive efficiency.

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In moving along a given budget line:

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The basic purpose of the "other things equal" assumption is to:

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The production possibilities curve is bowed out from the origin because:

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If an economy is operating inside its production possibilities curve for consumer goods and capital goods, this means that it:

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In a linear equation relating income and consumption, you know that the intercept is $1,000 and the slope of the line is.4.If income is $20,000, then consumption is:

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Refer to the above graph.Using Q_s for quantity supplied and P for price, which of the following equations correctly states the supply of this product?

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Refer to the above diagram.Which one of the following would shift the production possibilities curve from PP₁ to PP₂

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