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Chapter 2 Thinking Like an Economist




Question;127. When an economy is operating at a point on its production;possibilities frontier, then;a.;consumers;are content with the mix of goods and services that is being produced.;b.;there is;no way to produce more of one good without producing less of the other.;c.;equal;amounts of the two goods are being produced.;d.;All of;the above are correct.;128. Efficiency is illustrated by;a.;both the;production possibilities frontier and the circular-flow diagram.;b.;neither;the production possibilities frontier nor the circular-flow diagram.;c.;the;production possibilities frontier only.;d.;the;circular-flow diagram only.;129. Suppose a nation is currently producing at a point inside its;production possibilities frontier. We know that;a.;the;nation is producing beyond its capacity, so inflation will occur.;b.;the;nation is not using all available resources or is using inferior technology;or both.;c.;the;nation is producing an efficient combination of goods.;d.;there;will be a large opportunity cost if the nation tries to increase production;of any good.;130. When an economy is operating inside its production possibilities;frontier, we know that;a.;there;are unused resources or inefficiencies in the economy.;b.;all of;the economy?s resources are fully employed.;c.;economic;growth would have to occur in order for the economy to move to a point on the;frontier.;d.;in order;to produce more of one good, the economy would have to give up some of the;other good.;131. It is possible for an economy to increase its production of both;goods if the economy;a.;moves;downward and to the right along its production possibilities frontier and the;frontier is bowed outward.;b.;moves;upward and to the left along its production possibilities frontier and the;frontier is bowed outward.;c.;moves in;either direction along its production possibilities frontier and the frontier;is a straight line.;d.;moves;from a situation of inefficient production to a situation of efficient;production.;132. Unemployment would cause an economy to;a.;produce;inside its production possibilities frontier.;b.;produce;on its production possibilities frontier.;c.;produce;outside its production possibilities frontier.;d.;experience;an inward shift of its production possibilities frontier.;133. The production possibilities frontier provides an illustration of;the principle that;a.;trade;can make everyone better off.;b.;governments;can sometimes improve market outcomes.;c.;people;face trade-offs.;d.;people;respond to incentives.;134. The production possibilities frontier illustrates;a.;the;trade-off between efficiency and equality.;b.;the;combination of output that an economy should produce.;c.;the;combination of output that each member of society should consume.;d.;None of;the above is correct.;135. Which of the following trade-offs does the production possibilities;frontier illustrate?;a.;if an;economy wants to increase efficiency in production, then it must sacrifice;equality in consumption;b.;once an;economy has reached the efficient points on its production possibilities;frontier, the only way of getting more of one good is to get less of the;other;c.;for an;economy to consume more of one good, it must stop consuming the other good;entirely;d.;for an;economy to produce and consume goods, it must sacrifice environmental quality;136. Which of the following concepts cannot be illustrated by the;production possibilities frontier?;a.;efficiency;b.;opportunity;cost;c.;equality;d.;trade-offs


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