Economics 252
Review Questions - Chapter 2
– The Economizing Problem
(1) The science of economics stems from the fact that:
(a) individuals and institutions behave only in their
self-interest.
(b) resources are scarce relative to people’s demand for goods
and services.
(c) historically the production possibilities curve has been
shifting towards the origin.
(d) the production possibilities curve is bowed inward to the
origin.
(2) Which of the following is real capital?
(a) A
pair of stockings.
(b) A
dump truck.
(c) A
savings account.
(d) 100
shares of IBM stock.
(3) To realize “full production”, a society must achieve:
(a) any output lying outside of its production possibilities
curve.
(b) productive efficiency only.
(c) both productive and allocative efficiency.
(d) any output lying inside of its production possibilities
curve.
(4) Which of the following will not entail an outward
shift of the production possibilities curve?
(a) an upgrading of the quality of a nation’s human resources.
(b) the reduction of unemployment.
(c) an increase in the quantity of a society’s labor force.
(d) the improvement of a society’s technological knowledge.
(5) Which of the following is not an
illustration of the idea of opportunity cost?
(a) A
growing economy can produce more consumer goods and more capital goods at the
same time.
(b) If
I buy a pizza, I will not be able to go to the movies.
(c) Resources
devoted to consumer goods production are not available for capital goods
production.
(d) The
land that an
Consider
Figure 1 in answering Questions (6) and (7)
Figure 1
Q(3) Q(1) Quantity of Shoes (hundreds of thousands of units)
(6) In Figure 1, if the current output of
shoes is Q(1), then:
(a) society would consider additional units of shoes to be more
valuable than alternative products.
(b) society would consider additional units of shoes to be less
valuable than alternative products.
(c) society would experience a net loss by producing more shoes.
(d) resources are being allocated efficiently to the production
of shoes.
(7) In Figure 1, if the current output of shoes
is Q(2), then:
(a) society would consider additional units of shoes to be more
valuable than alternative products.
(b) society would consider additional units of shoes to be less
valuable than alternative products.
(c) society would experience a net loss by producing more shoes.
(d) resources are being allocated efficiently to the production
of shoes.
Consider
Figure 2 in answering questions (8) and (9).
Figure 2
(8) At point A on the production possibilities curve in Figure 2:
(a) wheat production is inefficient.
(b) tractor production is inefficient.
(c) the economy is employing all its resources.
(d) the economy is not employing all its resources.
(9) Unemployment and production inefficiency would best be
represented in Figure 2 by point:
(a) A
(b) B
(c) C
(d) D
(10) In Figure 2, which points are unattainable
in the short run.
(a)
A
(b)
B
(c)
C
(d)
C and D
Consider
the data in the following table to answer questions (11) and (12).
Production
possibilities (alternatives)
A B C D E F
Capital
goods 5 4 3 2 1 0
Consumer
goods 0 5 9 12 14 15
(11) If the economy is producing at production alternative C, the
opportunity cost of the tenth unit of consumer goods will be:
(a) 4
units of capital goods.
(b) 2
units of capital goods.
(c) 3
units of capital goods.
(d) 1/3
unit of capital goods.
(12) As compared to production alternative D, the choice of
alternative C would:
(a) tend to generate a more rapid growth rate.
(b) be unattainable.
(c) entail unemployment.
(d) tend to generate a slower growth rate.