Ch 2 Test

Which two groups of decision makers are included in the simple circular-flow diagram? markets and government households and government firms and government households and firms

Which of these terms are used interchangeably? "goods and services" and "inputs" "goods and services" and "factors of production" "inputs" and "factors of production" "land, labor, and capital" and "goods and services"

In economics, capital refers to the finances necessary for firms to produce their products. buildings and machines used in the production process. the money households use to purchase firms' output. stocks and bonds.

In the markets for the factors of production in the circular-flow diagram, households are sellers and firms are buyers. households are buyers and firms are sellers. households and firms are both buyers. households and firms are both sellers.

The production possibilities frontier is a graph that shows the various combinations of output that an economy should produce. wants to produce. can produce. demands.

Which of the following is a correct statement about production possibilities frontiers? An economy can produce only on the production possibilities frontier. An economy can produce at any point inside or outside a production possibilities frontier. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

Production is efficient if the economy is producing at a point on the production possibilities frontier. outside the production possibilities frontier. on or inside the production possibilities frontier. inside the production possibilities frontier.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that the nation is producing beyond its capacity, so inflation will occur. the nation is not using all available resources or is using inferior technology or both. the nation is producing an efficient combination of goods. there will be a large opportunity cost if the nation tries to increase production of any good.

The production possibilities frontier provides an illustration of the principle that trade can make everyone better off. governments can sometimes improve market outcomes. people face trade-offs. people respond to incentives.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the amount of the other good that must be given up. market price of the additional amount produced. amount of resources that must be devoted to its production. number of dollars that must be spent to produce it.

able 2-2 The following table contains some production possibilities for an economy for a given year: Cakes Rolls (in dozens) 100 5000 120 4600 140 ? Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be 4400. 4300. 4200. 4100.

A production possibilities frontier can shift outward if government increases the amount of money in the economy. there is a technological improvement. resources are shifted from the production of one good to the production of the other good. the economy abandons inefficient production methods in favor of efficient production methods.

The production possibilities frontier is used to illustrate some basic economic ideas, including scarcity. opportunity cost. economic growth. All of the above are correct.