PE_FINAL

Which is the most accurate statement about trade?

• Trade can make every nation better off.

• Trade makes some nations better off and others worse off.

• Trading for a good can make a nation better off only if the nation cannot produce that good itself.

• Trade helps rich nations and hurts poor nations.

The bowed shape of the production possibilities frontier can be explained by the fact that

• all resources are scarce.

• economic growth is always occurring.

• the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

• the only way to get more of one good is to get less of the other.

An economy’s production of two goods is efficient if

• all members of society consume equal portions of the goods.

•  

  it is impossible to produce more of one good without producing less of the other.

• the goods are produced using only some of society’s available resources.

• the opportunity cost of producing more of one good is zero.

Which of the following is a correct statement about production possibilities frontiers?

• An economy can produce only on the production possibilities frontier.

• An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.

• An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

• An economy can produce at any point inside or outside a production possibilities frontier.

In the circular-flow diagram, which of the following is not a factor of production?

• labor

• land

• capital

• money

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

•  

  enhance equality.

•  

  reduce the reward for working hard.

• All of the above are correct.

• reduce efficiency.

In markets, prices move toward equilibrium because of

• the actions of buyers and sellers

• government regulations placed on market participants.

• increased competition among sellers.

• buyers' ability to affect market outcomes.

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

• a smaller quantity of the good is bought and sold.

• a smaller quantity of the good is demanded.

• a larger quantity of the good is supplied.

• the price rises above the previous equilibrium.

Consider the market for portable air conditioners in equilibrium. When a heat wave strikes the equilibrium price

• and quantity both decrease.

• and quantity both increase.

•  

  increases, and the equilibrium quantity decreases

• decreases, and the equilibrium quantity increases.

If a surplus exists in a market, then we know that the actual price is

• below the equilibrium price, and quantity supplied is greater than quantity demanded.

• below the equilibrium price, and quantity demanded is greater than quantity supplied.

• above the equilibrium price, and quantity demanded is greater than quantity supplied.

• above the equilibrium price, and quantity supplied is greater than quantity demanded.