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Exam 1: Economics: The Core Issues

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Question 41

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Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus.Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers. $\begin{array}{|c|c|c|c|c|}\hline \text { Combination }&\begin{array}{c}\text { Number } \\\text { of Stealth } \\\text { Bombers }\end{array} & \begin{array}{c}\text { Opportunity cost } \\\text { of Stealth } \\\text { Bombers in } \\\text { Terms of B-1s }\end{array} & \begin{array}{c}\text { Number } \\\text { of B-1s }\end{array} & \begin{array}{c}\text { Opportunity } \\\text { Cost of B-1s in }\\\text { Terms of Stealth } \\\text { Bombers }\end{array} \\\hline \mathrm{S} & 10 & & 0 \\\hline \mathrm{T} & 9 & & 1 \\\hline \mathrm{U} & 7 & & 2 \\\hline \mathrm{V} & 4 & & 3 \\\hline\end{array}$ $\text { Table 1.1 Answers }$ $\text { Production Possibilities for Bombers }$ The highest opportunity cost anywhere in Table 1.1 for Stealth bombers in terms of B-1 bombers is

A) 1 B-1 bomber per Stealth bomber.
B) 3 B-1 bombers per Stealth bomber.
C) 2 B-1 bombers per Stealth bomber.
D) 0.5 B-1 bomber per Stealth bomber.

E) A) and D)
F) C) and D)

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Question 42

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If North Korea is currently producing at efficiency,and it proceeds to increase the size of its military,then,as long as nothing else changes,its

A) Production possibilities curve will shift outward.
B) Production possibilities curve will shift inward.
C) Production of nonmilitary goods will increase.
D) Production of nonmilitary goods will decrease.

E) B) and C)
F) A) and D)

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Question 43

Multiple Choice

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According to the text,there is no such thing as a free lunch because

The book Wealth of Nations was written by

When the invisible hand does not produce optimal outcomes for the economy,there is evidence of

The Latin phrase ceteris paribus means

The fact that there are too few resources to satisfy all our wants is attributed to

Which of the following is an assumption under which the production possibilities curve is drawn?

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X,ceteris paribus.Complete the table by calculating the required opportunity costs for brushes and combs. $\begin{array}{|c|c|c|c|c|c|}\hline \text { Combination } & \begin{array}{c}\text { Number } \\\text { of } \\\text { Brushes }\end{array} & \begin{array}{c}\text { Opportunity Cost } \\\text { of Brushes in } \\\text { Terms } \\\text { of Combs }\end{array} & \begin{array}{c}\text { Number } \\\text { of Combs }\end{array} & \begin{array}{c}\text { Opportunity Cost } \\\text { of Combs in Terms } \\\text { of Brushes }\end{array} \\\hline \text { J } & 0 & & 4 \\\hline \mathrm{K} & 10 & & 3 \\\hline \mathrm{L} & 17 & & 2 \\\hline \mathrm{M} & 21 & & 1 \\\hline \mathrm{N} & 23 & & 0 \\\hline\end{array}$ Table 1.3 Production Possibilities for Brushes and Combs On the basis of your calculations in Table 1.3,in the production range of 21 to 23 brushes the opportunity cost of producing more comb in terms of brushes is

Producing at a point inside the production possibilities curve

Explain the difference between macroeconomics and microeconomics.Give examples of each.

All output combinations that lie outside a production possibilities curve are attainable with available resources and technology. Attainable levels of production lie on or inside the production possibilities curve.

In this production range,2 additional stealth bombers require us to forgo the opportunity to produce one entire B-1 bomber,or half a B-1 bomber for each Stealth bomber.

How does the market mechanism answer the WHAT,HOW,and FOR WHOM questions?

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus.Complete the table by calculating the required opportunity costs for both the B-1 and Stealth bombers. $\begin{array}{|c|c|c|c|c|}\hline \text { Combination }&\text { Number of } & \begin{array}{c}\text { Opportunity Cost of } \\\text { Stealth Bombers in }\end{array} & \text { Number of } & \text { Opportunity Cost of B- } \\&\text { Stealth } & \text { Terms of B-1 } & \text { B-1 } & 1 \text { Bombers in Terms of } \\&\text { Bombers } & \text { Bombers } & \text { Bombers } & \text { Stealth Bombers } \\\hline \mathrm{A} & 195 & & 20 \\\hline \mathrm{B} & 180 & & 35 \\\hline \mathrm{C} & 150 & & 45 \\\hline \mathrm{D} & 100 & & 50 \\\hline\end{array}$ Table 1.2 Production Possibilities for Bombers On the basis of your calculations in Table 1.2,what is the opportunity cost of producing at point B rather than point C?

Using Figure 1.5,if an economy has the capacity to produce represented by PP2,then point E represents

The Economy Tomorrow on "Harnessing the Sun" states that the percentage of electricity that is generated from burning oil and coal is:

Which of the following is true when an economy is producing efficiently?

In Figure 1.3,a shift of the production possibilities curve from PP1 to PP2 could be caused by

In Figure 1.9,as you move up the curve from point J toward point M,the slope