When resources are better suited for some productive uses than for others, this causes the PPC to be
A) bowed out.
B) upward sloping.
C) downward sloping.
D) straight.
3
Which of the following reflects the principle of increasing marginal opportunity cost?
A) Two hamburgers cost twice as much as one hamburger.
B) A large soda costs more than a small soda.
C) Two more hours studying per week could raise your grade from a C to a B, but to raise it from a B to an A, would require 7 hours more studying per week.
D) Marginal costs increase whenever marginal benefits do.
4
When trade is voluntary,
A) only the seller benefits.
B) only the buyer benefits.
C) either the buyer or the seller can benefit, but not both.
D) both the buyer and the seller benefit.
5
If online economics courses can be created and administered in the United States for $1500 per pupil but equivalent courses can be created and administered in India for $150 per pupil, then the law of one price suggests
A) there will be strong economic pressure to outsource such courses to India.
B) the eventual price of such courses will be $1625.
C) there will be strong economic pressure to insource such courses to the US.
D) Americans will be made worse off by outsourcing.
6
Economists argue that the key benefit of countries engaging in trade based on comparative advantage, is that it
A) allows both counties to consume beyond their individual PPCs because each of the traded goods is produced in the country with the lowest opportunity cost.
B) allows countries to produce efficiently inside their individual PPCs.
C) is the only way both countries can consume on their individual PPCs.
D) allows both countries to maximize the opportunity costs of each of the goods they produce.
7
If all of society's resources are fully and efficiently employed, then it must be producing
A) At the lower right of the PPC.
B) At some point on the PPC.
C) Above the PPC.
D) below the PPC.
8
Refer to the graph. Given the production possibility curve for sweaters and jeans, which point is unattainable?
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A) A
B) B
C) C
D) D
9
Refer to the graphs. The discovery of a new supply of resources used in the production of guns and butter can be shown by which movement?
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A) From A-B to C-D in diagram A.
B) From C-D to A-B in diagram A.
C) From X-Y to X-Z in diagram B.
D) From X-Z to X-Y in diagram B.
10
Which of the following is an example of the law of one price?
A) Exchange rates tend to have equivalent values. For example, one Japanese Yen equals one U.S. dollar.
B) Because their countries have similar institutions, engineers in France and Germany are paid about the same.
C) Because wages are so much lower in China, eventually all U.S. jobs will be outsourced to China leaving the U.S. to import all goods at one price.
D) Because people have essentially the same basic needs wherever they live, they tend to buy the same bundle of goods.
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