Workings of a System. F

¶ … workings of a system. F Slope is measured as run/rise. F Opportunity cost is the combined value of all other alternatives that go unchosen. F Monetary costs and opportunity costs are always identical. F If the PPF for guns and butter is bowed outward from the origin, this indicates constant (not increasing) opportunity cost between the two goods. From a society's viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up some of another thing.

F A market economy allocates resources primarily in accordance with orders from government bureaucrats. Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools. T 9. Although all points on the PPF are efficient, that alone does not tell us which point is "best" for the society. T 10. In terms of efficiency, any point on a production possibilities frontier is as good an another. F 11. If two persons trade, one must gain at the expense of the other. T 12.

A change in the price of hamburgers will change the supply of hot dogs. F 13. If the demand curve shifts outward and the supply curve remains the same, price will fall. T 14. A decrease in the price of VCRs will increase demand for video cassettes. T 15. Demand curves can be affected by the prices of related goods. T 16. If the price of hamburger rises, we would expect the demand for steak to shift to the right. F 17.

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve. T 18. An increase in consumer income will shift both the supply and demand curves. F 19. Rent controls encourage investment in housing because they bring stability to the market. F 20. Price ceilings are designed to protect sellers, while price floors are designed to protect buyers. F 21. If aggregate demand keeps shifting rightward month after month and aggregate supply remains constant, the economy will experience a recession. T 22.

Gross Domestic Product represents the money value of all final goods and services produced in the domestic economy within the year. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. B 23. In 1971, a bank worker could process 265 checks in 1 hour. By 1986, with advanced computer scanners, that figure had risen to 825 checks per hour. Economists describe this type of activity as a. exploitation of labor. b. an increase in labor productivity. c. speed-up. d. comparative advantage. A 24.

The process of focusing on only the most important factors to explain a phenomenon is called a. abstraction. b. marginal analysis. c. rational choice. d. controlled experimentation. C 25. Economics is generally concerned with a. the operation of banks and the stock market. b. business management. c. how resources are allocated among alternative goals. d. the right time to start a business. D 26. Opportunity cost is best defined as the value of a. all of the other possible options that the decision maker could have chosen. b.

the alternative which the decision maker would choose if more resources were available. c. what is gained from the alternative which is chosen. d. the next best alternative that the decision forces one to give up. Table 2-2 Combination Cotton Corn A 12 16 B 17 15 C 21 13 D 23 9 E 24 5 B 27. In Table 2-2, from point C, the opportunity cost of 3 more units of cotton would be a. 4 units of corn. b. 8 units of corn. c. 14 units of corn. d. 16 units of corn. D 28.

In terms of the production possibilities diagram, the principle of increasing cost simply asserts that the frontier is a. downward sloping. b. upward sloping. c. bowed inward. d. bowed outward. Figure 2-2 B 29. In Figure 2-2, a point such as a a. is preferable over B. b. is an efficient use of resources. c. represents a misallocation of resources. d. is not obtainable. B 30. In Figure 2-2, a point such as D a. can be obtained through new technology. b. can never be obtained. c.

can only be obtained by a capitalist society. d. represents a misallocation of resources. B 31. An economy that wants to experience growth should a. increase current consumption and reduce producing capital goods. b. increase production of capital goods and reduce consumption. c. increase production of capital goods and increase consumption. d. decrease current consumption and reduce production of capital goods. A 32. If an economy is producing inefficiently, it is a. possible to increase production of all goods simultaneously. b.

possible to increase production of one good at the expense of another. c. not possible to increase production of any good. d. not possible to increase economic growth. C 33. If oranges and grapefruit are close substitutes, an increase in the price of oranges will shift the demand curve of a. both products to the right. b. both products to the left. c. grapefruit to the right. d. oranges to the left. D 34. An important assumption that is made when constructing a supply schedule is a.

only price and quantity matter in determining supply. b. firms always want to sell a certain amount of a product. c. supply is too important to be left to the marketplace. d. all other determinants of supply are held constant. e. demand has a positive slope. D 35. A severe freeze has once again damaged the Florida orange crop. The impact on the market for oranges will be a leftward shift in a. demand as consumers try to economize because of the shortage. b. both the supply and demand curves. c.

the supply curve. d. the supply curve and a rightward shift in the demand curve, which will result in a higher price. D 36. A good produced in 2000 and held in inventory until it is sold in 2001 would be included in which measure of GDP? a. Half the value in 2000 and half the value in 2001 b. In 2001 GDP c. In both 2000 and 2001 GDP d. In 2000 GDP B 37. In 1999, you buy a beautiful vintage 1965 Thunderbird convertible. This purchase would a. be included in the GDP for 1999. b.

not be included in the GDP for 1999. c. be included in both the GDP for 1965 and 1999. d. be in the GDP for 1999 at a depreciated value. B 38. Gross Domestic Product is a monetary measure of a. total consumption in the economy. b. the total value of all final goods and services. c. total industrial output. d. the total value of all foreign sales and purchases. B 39. The most severe depression in the United States was the 30% decrease in real GDP that occurred between a. 1899 and 1913. b. 1929 and 1933. c. 1959 and 1963. d.

1979 and 1983. B 40. If wages rise by 12%.