Production Possibilities and Opportunity Costs
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1. Human capital includes
a. food
b. a briefcase
c. books
d. heart medicine
e. education

2. Which of the following is a characteristic of "labor"?
a. It is not necessarily productive.
b. It must involve physical effort.
c. It can be coerced.
d. It must involve mental effort.
e. none of the above

3. A major factor of production is
a. land
b. labor
c. capital
d. entrepreneurship
e. all of the above

4. The Production Possibilities Frontier tells us
a. the combinations of goods and services we can produce if all resources are fully employed.
b. the combination goods we could consume if we trade with other nations.
c. the fair distribution of consumption among all consumers.
d. all of the above
e. none of the above

5. The shape of the Production Possibilities Frontier represents
a. the fact that the economy is a "Robinson Crusoe" Economy.
b. scarcity of resources.
c. the law of increasing costs.
d. none of the above
e. all of the above

6. Which of the following is an opportunity cost of seeing a movie on Friday night?
a. the money I spend on the ticket
b. the time I spend going to the movies
c. the movie I decide not to see
d. all of the above
e. none of the above

7. If a Production Possibilities Frontier shifts out,
a. unemployment has been reduced.
b. the country must be trading with other nations.
c. it will be possible for the population to consume more goods and services.
d. none of the above.

8. Which of the following will not cause a Production Possibilities Frontier to shift out?
a. technological improvement
b. population growth
c. economic specialization
d. reduction of unemployment
e. all of the above

9. If a country wants its economy to grow it can
a. invest more in capital goods.
b. save resources by moving from a point on the PPF to one inside.
c. invest in education.
d. a and b
e. a and c

10. If an economy is producing at a point inside the Production Possibilities Frontier,
a. it is saving resources for the future.
b. it is not using all the resources at its disposal.
c. it must engage in international trade if it wants to increase consumption.
d. it should invest in new technology if it wants to increase consumption.

11. According to the law of comparative advantage,
a. countries should specialize in the good they produce at lowest economic costs.
b. countries should specialize in goods with the lowest opportunity cost.
c. countries should specialize in goods where they have the greatest technological advantage.
d. there is no point in specializing in any good, since any advantage a country might have will only be "comparative" with other countries.

12. Economic efficiency means
a. less than feasible output for a given amount of resources.
b. producing more than feasible output for a given amount of resources.
c. producing the maximum feasible output for a given amount of resources.
d. producing no more than what is needed.
e. producing in excess of what is needed.

13. When there is labor specialization, which of the following occurs?
a. Labor productivity decreases and the Production Possibility Frontier shifts inward.
b. Labor productivity increases and the Production Possibilities Frontier shifts outward.
c. Labor productivity does not change.
d. The Production Possibilities Frontier does not shift.

14. In Figure 1, which of the following is true?
a. C is more efficient than B.
b. Society prefers B to C.
c. E is more efficient than C.
d. C will lead to a higher rate of growth than will B.

       

15. In Figure 1, we are currently at point A. Which of the following could allow us to reach point E next year?
a. We increase economic efficiency.
b. We decide to produce more capital goods and fewer consumer goods.
c. Unemployment is decreased.
d. a and b.
e. b and c.




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