Subject: Economics    / General Economics
Question

1. On graduation you accept a job at BLS for $45,000 per year. The two other offers you receive
were working for Wal-Mart for $38,000 and working for Ernst & Young for $42,000. Of these
two offers, you would have preferred the job at Ernst & Young. What is the opportunity cost of
accepting the job at BLS?
A the $45,000 you are paid working for BLS
B the $42,000 you would have been paid working for Ernst & Young
C the $38,000 you would have been paid working for Wal-Mart
D the $42,000 you would have been paid working for Ernst & Young and the $38,000 you
would have been paid working for Wal-Mart
2. Production points inside the production possibilities frontier
A
B
C
D are unattainable
are attainable only with the full utilization of all resources
are associated with unused or misallocated resources
result in more rapid growth The production possibilities frontier is the boundary between those combination of goods and
services that can be
3. A) produced and those that can be consumed.
B) consumed domestically and those that can be consumed by foreigners.
C) produced and those that cannot be produced.
D) consumed and those that cannot be produced. 4. On the vertical axis, the production possibilities frontier shows ________; on the horizontal
axis, the production possibilities frontier shows ________.
A) the quantity of a good; the number of workers employed to produce the good
B) the quantity of a good; the price of the good
C) the quantity of a good; a weighted average of resources used to produce the good
D) the quantity of one good; the quantity of another good 5. The above figure illustrates that if this country wishes to move from its current production
point (labeled "Current") and have 10 more tons of food, it can do this by producing
A) 10 more tons of clothing.
B) 10 fewer tons of clothing.
C) 5 more tons of clothing.
D) 5 fewer tons of clothing.
6. A president of the United States promises to produce more defense goods without any
decreases in the production of other goods. Assuming that all else remains the same, this
promise can only be valid
A) if the United States is producing at a point on its production possibilities frontier.
B) if the United States is producing at a point inside its production possibilities frontier.
C) if the United States is producing at a point beyond its production possibilities frontier.
D) only if the production possibilities frontier shifts rightward. 7. Refer to the production possibilities frontier in the figure above. Which production point
indicates that resources are NOT fully utilized or are misallocated?
A) Point a
B) Point b
C) Point c
D) Point e
8. Refer to the production possibilities frontier in the figure above. Which production point is
unattainable?
A) Point a
B) Point b
C) Point c
D) Point e
9. Refer to the production possibilities frontier in the figure above. Production point ________
represents an ________ production point.
A) b; unattainable.
B) c; unattainable.
C) e; inefficient.
D) c; inefficient.
10. In the figure above, moving from production at point d to production at point a requires
A) technological change.
B) a decrease in unemployment.
C) decreasing the output of consumer goods in order to boost the output of capital goods.
D) both capital accumulation and a decrease in unemployment. 11. Refer to the production possibilities frontier in the figure above. Suppose a country is
producing at point a. A movement to point ________ means that the country ________.
A) d; must give up 20 million capital goods
B) e; is not operating efficiently
C) d; gives up 10 million consumer goods.
D) b; is producing at an inefficient point.
12. Opportunity cost is best defined as
A) the amount of money that an individual is willing to pay to purchase a good that means a
great deal to that person.
B) the amount of money lost by one individual in an exchange process so that another individual
might gain.
C) the highest-valued alternative that is forgone when choosing among various alternatives.
D) a situation in which one individual cannot have an absolute advantage over another individual
in the production of all goods.
13. Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement
A) from the region within the PPF to a point on the PPF.
B) from the region within the PPF to the region outside of the PPF.
C) from the region outside of the PPF to a point on the PPF.
D) along the PPF where to gain more of one good it is necessary to give some of another good.
14. While producing on the production possibilities frontier, if additional units of a good could
be produced at a constant opportunity cost, the production possibilities frontier would be
A) bowed outward.
B) bowed inward.
C) positively sloped.
D) a straight line.
15. When resources are assigned to inappropriate tasks, that is, tasks for which they are not the
best match, the result will be producing at a point
A) where the slope of the PPF is positive.
B) where the slope of the PPF is zero.
C) inside the PPF.
D) outside the PPF. 16. Consider the PPF for office buildings and housing shown in the figure above. Which point
in the diagram shows that resources to produce office buildings and housing are being
misallocated, unused, or both?
A) Point F
B) Point G
C) Point H
D) Point I
17. At one point along a PPF, 50 tons of coffee and 100 tons of bananas are produced. At
another point along the same PPF, 30 tons of coffee and 140 tons of bananas are produced. The
opportunity cost of a ton of coffee between these points is
A) 7/5 of a ton of bananas per ton of coffee.
B) 1/2 of a ton of bananas per ton of coffee.
C) 5/7 of a ton of bananas per ton of coffee.
D) 2 tons of bananas per ton of coffee.
18. At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point
along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a
pizza between these points is ________ per pizza.
A) 7/10 of a sandwich
B) 10/7 of a sandwich
C) 1/3 of a sandwich
D) 3 sandwiches
19. Generally, opportunity costs increase and the production possibilities frontier bows outward.
Why?
A) Unemployment is inevitable.
B) Resources are not equally useful in all activities.
C) Technology is slow to change.
D) Labor is scarcer than capital. 20. Moving from one point on the production possibilities frontier to another ________.
A) involves a tradeoff but does not incur an opportunity cost
B) involves an opportunity cost but no tradeoff
C) involves a tradeoff and incurs an opportunity cost
D) involves no tradeoff but it does incur an opportunity cost Point
A
B
C
D
E Production
Production
chocolate bars cans of cola
0
100
10
90
20
30
40 70
40
0 21. The above table shows production points on Sweet-Tooth Land’s production possibilities
frontier. What is the opportunity cost of one chocolate bar if Sweet-tooth Land moves from point
C to point D?
A) 30 cans of cola per chocolate bar
B) 10 cans of cola per chocolate bar
C) 3 cans of cola per chocolate bar
D) 1/3 can of cola per chocolate bar
22. The above table shows production points on Sweet-Tooth Land’s production possibilities
frontier. What is the opportunity cost of one can of cola if Sweet-tooth Land moves from point C
to point B?
A) 20 chocolate bars per can of cola
B) 10 chocolate bars per can of cola
C) 2 chocolate bars per can of cola
D) 1/2 chocolate bars per can of cola 23-25
Point
A
B
C
D
E Production of Production of
X
Y
0
40
3
36
6
28
9
16
12
0 23. The above table shows production combinations on a country’s production possibilities
frontier. The opportunity cost of increasing the production of Y from 16 to 28 units is ________
units of good X. (Simply, the amount of good X you sacrifice or lose to increase production of
good Y.)
A) 12
B) 6
C) 3
D) There is no opportunity cost when moving from one point to another along a production
possibilities frontier so none of the above answers is correct.
24. The above table shows production combinations on a country’s production possibilities
frontier. What is the opportunity cost of one unit of Y when the production of good Y increases
from 16 to 28 units?
A) 4 units of good X per unit of good Y
B) 3 units of good X per unit of good Y
C) 1/4 unit of good X per unit of good Y
D) There is no opportunity cost when moving from one point to another along a production
possibilities frontier.
25. The above table shows production combinations on a country’s production possibilities
frontier. What is the opportunity cost of increasing the production of X from 0 to 3 units?
A) 40 units of good Y per unit of good X
B) 3 units of good Y per unit of good X
C) 4/3 units of good Y per unit of good X
D) 0 units of good Y per unit of good X

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