Chapter 2: PPF Microeconomics ECN 2103

Name:

True/False
Indicate whether the sentence or statement is true or false.

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Points outside the production possibilities frontier are attainable but inefficient.

If an economy were experiencing substantial unemployment, the economy is producing inside the production possibilities frontier.

The production possibilities frontier is bowed outward because the trade-offs between the production of any two goods are constant.

An advance in production technology would cause the production possibilities curve to shift outward.

Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets.

The statement, "An increase in inflation tends to cause unemployment to fall in the short run," is normative.

When economists make positive statements, they are more likely to be acting as scientists.

Normative statements can be refuted with evidence.

10.

Most economists believe that tariffs and import quotas usually reduce general economic welfare.

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

11.

The scientific method requires that

a.	the scientist be objective.
b.	the scientist use precision equipment.
c.	only correct theories are tested.
d.	only incorrect theories are tested.
e.	the scientist use test tubes and have a clean lab.

12.

Which of the following is most likely to produce scientific evidence about a theory?

a.	A lawyer employed by Renault addressing the impact of air bags on passenger safety.
b.	An economist permanently employed at a leading university analysing the impact of bank regulations on lending to small businesses.
c.	An economist employed by the Trades Union Congress doing research on the impact of trade policy on workers' wages.
d.	A radio talk show host collecting data from listeners on how capital markets respond to taxation.

13.

Which of the following is not a factor of production?

a.	labour
b.	land
c.	money
d.	capital
e.	All of these answers are factors of production.

14.

Points on the production possibilities frontier are

a.	inefficient.
b.	normative.
c.	unattainable.
d.	efficient.
e.	none of these answers.

15.

Which of the following will not shift a country's production possibilities frontier outward?

a.	an advance in technology
b.	an increase in the labour force
c.	an increase in the capital stock
d.	a reduction in unemployment

16.

Economic growth is depicted by

a.	a shift in the production possibilities frontier outward.
b.	a movement from inside the curve toward the curve.
c.	a shift in the production possibilities frontier inward.
d.	a movement along a production possibilities frontier toward capital goods.

17.

Refer to Exhibit 6. If the economy is operating at point C, the opportunity cost of producing an additional 20 units of bacon is

a.	40 units of eggs.
b.	10 units of eggs.
c.	20 units of eggs.
d.	30 units of eggs.
e.	50 units of eggs.

18.

Refer to Exhibit 6. If the economy were operating at point E,

a.	the opportunity cost of 20 additional units of eggs is 10 units of bacon.
b.	the opportunity cost of 20 additional units of eggs is 20 units of bacon.
c.	the opportunity cost of 20 additional units of eggs is 30 units of bacon.
d.	20 additional units of eggs can be produced with no impact on bacon production.

19.

Refer to Exhibit 6. Point F represents

a.	none of these answers.
b.	a combination of production that can be reached if we reduce the production of eggs by 20 units.
c.	a combination of production that can be reached if there is a sufficient advance in technology.
d.	a combination of production that is inefficient because there are unemployed resources.

20.

Refer to Exhibit 6. As we move from point A to point D,

a.	the opportunity cost of eggs in terms of bacon falls.
b.	the opportunity cost of eggs in terms of bacon rises.
c.	the opportunity cost of eggs in terms of bacon is constant.
d.	the economy becomes less efficient.
e.	the economy becomes more efficient.

21.

Which of the following statements is normative?

a.	Large government deficits cause an economy to grow more slowly.
b.	People work harder if the wage is higher.
c.	The unemployment rate should be lower.
d.	Printing too much money causes inflation.

22.

Positive statements are

a.	macroeconomic.
b.	microeconomic.
c.	statements of description that can be tested.
d.	statements of prescription that involve value judgments.