EC 142, Chapter 1 – Quiz And Answers
2023 Updated
If an economy is producing at a point inside a production possibilities curve: -
ANSWER-resources
... [Show More] are unemployed.
If an economy is producing at a point inside a production possibilities curve, the
economy is not producing the maximum amount that they could produce given the
resources that they have available - ANSWER-In this case, resources are unemployed
which is an inefficient economic outcome.
In a market economy, entrepreneurs are most concerned with: - ANSWER-maximizing
profits or minimizing losses.
When an individual starts a business, although their motivations may vary, the primary
objective of the business is to make as much money as possible operating under the
constraints of the business (resource limits, employee satisfaction goals, ethics rules,
etc.). - ANSWER-Maximizing profits or minimizing losses is the primary focus of most
entrepreneurs.
Along a production possibilities curve, an increase in the production of one type of good
can be accomplished only by: - ANSWER-decreasing the production of the other type of
good.
When we look at the production possibilities curve, in order to gain additional units of
one good, we have to give up some of the production of the other good that we are
producing. - ANSWER-This is due to the fact that our resources are limited.
Within a market economy, some industries may be declining while other industries may
be expanding. This indicates that: - ANSWER-resources are being reallocated.
When one industry is declining that means that the demand for the goods and services
produced in that industry is falling (like the market for typewriters when the personal
computer came out). - ANSWER-When this occurs, society reallocates their resources
to the goods that they would prefer to have (personal computers).
Use the table to complete the following question.
The following economy produces two products.
Production Possibilities
Products A B C D E F
Steel 0 1 2 3 4 5
Wheat 100 90 75 55 30 0
Refer to the above table. In moving from possibility A to F, the cost of a unit of steel in
terms of a unit of wheat: - ANSWER-increases.
When we move from A to B, we have to give up 10 units of wheat (100 - 90) in order to
gain 1 unit of steel. When we move from B to C, the additional unit of steal costs us 15
units of wheat (90 - 75). From C to D, the cost is 20. - ANSWER-This is an increasing
cost relationship (10 to 15 to 20 to 25 to 30).
A point inside the production possibilities curve is: -
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