MULTIPLE CHOICE QUESTIONS: Note: Price elasticity of demand is given as an absol

Question

MULTIPLE CHOICE QUESTIONS:

Note:  Price elasticity of demand is given as an absolute value throughout.

The production possibility frontiers for Arboc and Arbez are shown below.  Use this information for the next nine questions.

1.      Which of the following is most likely to shift out the Arbocali production possibility frontier?
A.     An increase in the general educational level of the Arbocali labor force.
B.     An increase in the income of Arbocali consumers.
C.     An increase in the purchase of stocks on the Arbocali Stock Exchange.
D.     A reallocation of resources toward consumer goods.

2.      If the Arbocali economy moves from Point A to Point B, the opportunity cost would be
A.     30 consumer goods.
B.     20 capital goods.
C.     40 capital goods.
D.     10 consumer goods.

3.      If the Arbocali economy moved from Point A to Point B, we would expect
A.     a decreased standard of living in the future as consumption has decreased.
B.     increased unemployment in the future.
C.     decreased unemployment in the future.
D.     the economy to grow more rapidly in the future

4.      Arbez is currently producing 25 consumer goods and 60 capital goods.  If Arbez increases capital good production to 75, the opportunity cost will be
A.     15 consumer goods.
B.     0 consumer goods.
C.     5 consumer goods.
D.     10 consumer goods.

5.      Both Arboc and Arbez are producing 30 consumer goods and each is on its production possibility frontier.  We can conclude that
A.     Both economies will grow equally rapidly.
B.     Arboc will grow more rapidly than Arbez.
C.     Arbez will grow more rapidly than Arboc.
D.     Arboc is currently experiencing a higher rate of unemployment than Arbez.

6.      Arbez becomes able to increase its maximum output of consumer goods.  This indicates that the opportunity cost of consumer goods in Arbez has
A.     decreased and the opportunity cost of capital goods has remained unchanged.
B.     increased and the opportunity cost of capital goods has decreased.
C.     increased and the opportunity cost of capital goods has remained unchanged.
D.     decreased and the opportunity cost of capital goods has increased.

7.      Arbez

Explanation / Answer

The production possibility frontiers for Arboc and Arbez are shown below. Use this information for the next nine questions.

1. Which of the following is most likely to shift out the Arbocali production possibility frontier?
A. An increase in the general educational level of the Arbocali labor force.

2. If the Arbocali economy moves from Point A to Point B, the opportunity cost would be
figure required to answer

10. Along the production possibility frontier, trade-offs exist because
D. the economy has only a limited quantity of resources to allocate between competing uses.

11. The Arbezani economy is operating at a point inside its ppf. This may be because
C. poor management practices have led to an inefficient use of resources.

12. Which of the following do not count as productive resources?
C. Financial resources, such as a twenty dollar bill.

13. There is a technological improvement in the production of consumer goods. Along the ppf, the opportunity cost of consumer goods will
B. decrease.

14. A production possibility frontier will shift out (right) if
D. the labor force increases.

15. During the next hour, Billy-Bob can shoot pool (which he values at $20) or study economics (which he values at $16) or help the poor (which he values at $3). He chooses to shoot pool. The opportunity cost of this choice is
D. $16.

16. Which of the following events will cause the production possibility frontier to shift inwards.
B. The government pays dairy farmers to kill half of their cattle.

17. Consumers believe an advert that claims that the price of orange juice soon will rise significantly. Simultaneously, there is an outstanding Florida orange crop. The demand curve for orange juice will shift _______ and the supply curve of orange juice will shift _______.

D. left; right

18. There is a surplus in the market for lettuce. We would expect
B. the price to decrease.

19. Which point implies the existence of unemployment?
Use the diagram for the next five questions. It shows the production possibility frontier for

24. The beer market is in equilibrium. Now the legal beer-drinking age is raised to 35. In a demand and supply diagram, the demand curve for beer will _____________ and the supply curve for beer will _____________.
A. shift to the left; not shift

25. The beer market is in equilibrium. Which ONE of the following will make the price of beer rise?
B. Scientists report that bathing in beer makes one irresistible to the opposite sex.

26. The beer market is in equilibrium. Now the legal beer-drinking age is raised to 35. Equilibrium price will _______ and equilibrium quantity will _______ in this market.
D. fall; fall

27. Energizer and Duracell

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