Microeconomics chapter 2 exam- J Baker -Online- Owens

1) An outward shift of a nation's production possibilities frontier represents

A) A situation in which a country produces more of one good and less of another.
B) Economic growth.
C) An impossible situation.
D) Rising prices of the two goods on the production possibilities frontier model.

2) "An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by

A) John Maynard Keynes.
B) Karl Marx.
C) Adam Smith.
D) Alfred Marshall.

3) A successful market economy requires

A) A government-controlled banking system and government price controls.
B) Well-defined property rights and an independent court system to adjudicate disputes based on the law.
C) An equitable distribution of income and limits on immigration.
D) Generous unemployment benefits and paid medical leave for everyone in the labor force.

4) According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?
A) The country's total production will fall.
B) Fewer goods will be produced for consumption today.
C) Future economic growth will decline.
D) The production possibilities frontier will be shift inward in the future

5) Adam Smith's behavioral assumption about humans was that people

A) Typically act irrationally.
B) Are consistently greedy.
C) Usually act in a rational, self-interested way.
D) Typically act randomly.

6) Adam Smith's invisible hand refers to

A) Property ownership laws and the rule of the court system.
B) The laws of nature that influence economics decisions.
C) The process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.
D) the government's unobtrusive role in ensuring that the economy functions efficiently.

7) All of the following are critical functions of the government in facilitating the operation of a market economy except

A) Enforcing property rights.
B) Protecting private property.
C) Enforcing contracts.
D) Ensuring an equal distribution of income to all citizens.

8) All of the following are examples of spending on factors of production in the circular flow model except

A) Bima hires two students to work at his ice-cream store.
B) The Banyan Tree rents a much larger property so that it can add a restaurant to its facilities.
C) Iris buys a dozen roses for her mother's birthday.
D) "Get Fit Together" purchases 3 new treadmills for its gym.

9) An inward shift of a nation's production possibilities frontier can occur due to

A) A reduction in unemployment.
B) An increase in the labor force.
C) A change in the amounts of one good desired.
D) A natural disaster like a hurricane or bad earthquake.

10) Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional

A) 10 silk roses?
B) 2.5 silk leaves
C) 10 silk leaves
D) 25 silk leaves
E) 55 silk leaves

11) Comparative advantage means the ability to produce a good or service

A) Of a higher quality than any other producer.
B) At a higher profit level than any other producer.
C) At a lower opportunity cost than any other producer.
D) at a lower selling price than any other producer.

12) Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

A) Becoming flatter.
B) Becoming steeper.
C) Shifting inward.
D) Shifting outward.

13) Figure 2-1
Refer to Figure 2-1. Point A is

A) Unattainable with current resources.
B) The equilibrium output combination.
C) Technically efficient.
D) Inefficient in that not all resources are being used.

14) Figure 2-1
Refer to Figure 2-1. Point C is

A) Technically efficient.
B) Is the equilibrium output combination.
C) Inefficient in that not all resources are being used.
D) Unattainable with current resources.

15) Figure 2-1
Refer to Figure 2-1. Point B is

A) Technically efficient.
B) Inefficient in that not all resources are being used.
C) The equilibrium output combination.
D) Unattainable with current resources.

16) Figure 2-4
Figure 2-4 shows various points on three different production possibilities frontiers for a nation
Refer to Figure 2-4. A movement from X to Y

A) Is the result of advancements in plastic production technology only, with no change in food production technology.
B) Is the result of advancements in food production technology only, with no change in the technology for plastic production.
C) Could occur because of an influx of immigrant labor.
D) Could be due to a change in consumers' tastes and preferences.