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Over the past several decades, the United States has devoted a greater fraction of its resources to consumption than Hong Kong, which is why the U.S. economy grew faster than Hong Kongʹs economy.

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Two social institutions that are essential for trade to be organized are___________ .


A) markets and banks
B) businesses and banks
C) markets and property rights
D) property rights and laws

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Generally, opportunity costs increase and the production possibilities frontier bows outward. Why?


A) Labor is scarcer than capital.
B) Resources are not equally useful in all activities.
C) Unemployment is inevitable.
D) Technology is slow to change.

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When economic growth occurs, the


A) economy moves along its production possibilities frontier
B) production possibilities frontier becomes steeper
C) production possibilities frontier shifts outward
D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.

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Two nations can produce computers and software in the amounts given in the table above. Does either nation have an absolute advantage in producing the products? Which nation has a comparative advantage in computers? Which nation has a comparative advantage in software? Explain your answers.

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Nation B has an absolute advantage in pr...

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Explain why the production possibilities frontier bows outward.

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The bowed outward PPF reflects increasin...

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 Point  Production of X Production of Y A 040B336 C 628 D 916 E 120\begin{array} { | l | l | l | } \hline \text { Point } & \begin{array} { l } \text { Production of } \\X\end{array} & \begin{array} { l } \text { Production of } \\Y\end{array} \\\hline \text { A } & 0 & 40 \\\hline B & 3 & 36 \\\hline \text { C } & 6 & 28 \\\hline \text { D } & 9 & 16 \\\hline \text { E } & 12 & 0 \\\hline\end{array} -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 per unit of good Y.


A) 12
B) 3
C) 6
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.

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Resource use is allocatively efficient


A) whenever marginal cost exceeds marginal benefit.
B) whenever marginal benefit exceeds marginal cost.
C) when marginal benefit equals marginal cost.
D) when the maximum possible quantity is being produced.

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If production point is inside the production possibilities frontier


A) production is inefficient.
B) production is in the ʺunattainableʺ region.
C) it is not possible to produce more of both goods
D) in order to produce more of one good, less of the other must be produced.

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A society that is producing on its production possibilities frontier is


A) not utilizing all of its resources.
B) producing too much output.
C) fully utilizing all of its productive resources.
D) not being technologically efficient.

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Marginal benefit curves slope


A) downward because of increasing opportunity cost.
B) upward because of increasing opportunity cost.
C) downward, but not because of increasing opportunity cost.
D) upward, but not because of increasing opportunity cost.

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Production possibilities  Possibility  Pizza (per  hour)   Soda  (cases per  hour)   A 0100 B 195 C 280 D 360 E 435 F 50\begin{array} { | l | l | l | } \hline \text { Possibility } & \begin{array} { l } \text { Pizza (per } \\\text { hour) }\end{array} & \begin{array} { l } \text { Soda } \\\text { (cases per } \\\text { hour) }\end{array} \\\hline \text { A } & 0 & 100 \\\hline \text { B } & 1 & 95 \\\hline \text { C } & 2 & 80 \\\hline \text { D } & 3 & 60 \\\hline \text { E } & 4 & 35 \\\hline \text { F } & 5 & 0 \\\hline\end{array} -In the above table, the opportunity cost of the 2nd pizza is


A) 0 cases of soda per pizza.
B) 80 cases of soda per pizza.
C) 95 cases of soda per pizza.
D) 15 cases of soda per pizza.

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Individual economic decisions are coordinated by


A) markets through adjustments in sales levels.
B) government through adjustments in sales taxes.
C) markets through adjustments in prices.
D) government through adjustments in income taxes.

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Moving from one point on the production possibilities frontier to another .


A) involves no tradeoff but it does incur an opportunity cost
B) involves a tradeoff but does not incur an opportunity cost
C) involves an opportunity cost but no tradeoff
D) involves a tradeoff and incurs an opportunity cost

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Production points inside the production possibilities frontier


A) are attainable only with the full utilization of all resources.
B) result in more rapid growth.
C) are associated with unused or misallocated resources.
D) are unattainable.

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Economic growth


A) creates unemployment.
B) makes it more difficult for a nation to produce on its PPF.
C) shifts the PPF outward.
D) has no opportunity cost.

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An opportunity cost of economic growth is


A) so high that places such as Hong Kong have had to do without it.
B) essentially zero because economic growth leads to such large gains in the long run.
C) decreased by the creation of capital goods rather than consumption goods.
D) the decrease in production of consumption goods in the present time period.

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Blue Violet's \quad\quad\quad Orange Rose's production possibilities production possibilities  Teapots  (number  Coffee pots  (number  Teapots  (number  Coffee pots  (number  perweek)   perweek)   perweek)   perweek)  150&075&75100&2550&5050&5025&1000&750&150\begin{array}{|llll|}\hline \begin{array}{l}\text { Teapots } \\\text { (number }\end{array} & \begin{array}{l}\text { Coffee pots } \\\text { (number }\end{array} & \begin{array}{l}\text { Teapots } \\\text { (number }\end{array}& \begin{array}{l}\text { Coffee pots } \\\text { (number }\end{array} \\\text { perweek) } & \text { perweek) } & \text { perweek) }& \text { perweek) }\\\hline 150&\&0&75&\&75\\\hline 100&\&25&50&\&50\\\hline 50&\&50&25&\&100\\\hline 0&\&75&0&\&150\\\hline \end{array} -Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities._____________ has a comparative advantage in teapots and _________has a comparative advantage in coffeepots.


A) Orange Rose; Blue Violet
B) Orange Rose; Orange Rose
C) Blue Violet; Blue Violet
D) Blue Violet; Orange Rose

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According to the principle of comparative advantage, if a rich country trades with a poor country, then


A) the rich country will benefit and the poor country will lose.
B) the rich country will lose and the poor country will benefit.
C) both countries will benefit.
D) neither of the countries will benefit.

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The production possibilities frontier bows outward because


A) resources are of uniform quality.
B) opportunity costs are fixed as the production of a good increases.
C) opportunity costs are increasing as the production of a good increases.
D) opportunity costs are decreasing as the production of a good increases.

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