Unit 1 Review (Economics)

10. Which of the following would cause an outward or rightward shift in the production possibilities curve?

• A. An increase in unemployment

• B. An increase in inflation

• C. An increase in capital equipment

• D. A decrease in natural resources

• E. A decrease in the number of workers

5. If the production possibilities curve is concave from the origin (or bowed out), then economists say that

• A. Resources are scarce in the economy

• B. Resources are not equally suited for the production of both goods

• C. Economic growth is occurring in the economy

• D. Resources are being inefficiently used in the economy

• E. Resources are equally suited for the production of either good

3. Which of the following is true of the concept of increasing opportunity costs?

• A. It is unimportant in command economies because of central plannining

• B. It suggests that the use of resources to produce a set of goods and services means that as more of one is produced, some of the other must be sacrificed.

• C. It is irrelevant if the production possibilities curve is convex to the origin

• D. It suggests that unlimited wants can be fulfilled.

• E. It means that resources are plentiful and opportunities to produce greater amounts of goods and services are unlimited.

14. It is most accurate to say

• A. Normative statements focus on facts while positive statements involve value judgments.

• B. Normative statements involve value judgements while positive statements focus on facts.

• C. Normative and positive statements both focus on facts and neither involve value judgments.

• D. Normative and positive statements both involve value judgements and neither focuses on facts.

• E. Normative statements involve value judgements and focus on facts while positive statements only focus on facts.

1.The crucial problem of economics is

• A. Establishing a fair tax system.

• B. Providing social goods and services

• C. Developing a price mechanism that reflects the relative scarcities of products and resources.

• D. Allocating scarce productive resources to satisfy wants.

• E. Enacting a set of laws that protects resources from overuse.

8. The law of increasing opportunity cost is reflected in the shape of the

• A. Production possibilities curve concave to the origin (“bowed-out”).

• B. Production possibilities curve convex to the origin (“bowed-in”).

• C. Horizontal production possibilities curve.

• D. Straight-line production possibilities curve.

• E. Upward-sloping production possibilities curve.

5. Which of the following goods would be considered scarce?

I. Education

II. Gold

III. Time

• A. I only

• B. II only

• C. III only

• D. I and II only

• E. I, II and III

6. A point outside the production possibilities curve would represent

• A. An efficient use of resources.

• B. Future output once producers become more efficient.

• C. An inefficient use of resources.

• D. A combination that cannot be achieved due to scarcity.

• E. Full employment of resources in the economy.

12. If Mike can make 2 surfboards per hour or 10 bikes per hour and Joe can produce 4 surfboards per hour and 12 bikes. Which of the following is true?

• A. Mike has an absolute advantage in the production of surfboards.

• B. Mike’s opportunity cost for producing one bike is 5 surfboards.

• C. Joe has a comparative advantage in the production of both surfboards and bikes.

• D. Mike has a comparative advantage in the production of surfboards.

• E. Joe’s opportunity cost for producing one surfboard is 3 bikes.

1. Which of the following is true for all economies regardless of their economic system?

• A. Every economy must determine what to produce and how it produce goods and services.

• B. Every economy must find a way to distribute income equally.

• C. Every economy must find ways to privatize markets to maximize efficiency.

• D. Every economy must prevent unemployment through government intervention.

• E. Every economy must open free trade with other economies.