# Production possibility curve

ECO365/ECO365 FINAL EXAMINATION (30/30)
1. Because you can only obtain more of one good by giving up some of another good, the shape of a production possibility curve is _______________.
downward-sloping
perfectly vertical
perfectly horizontal
upward-sloping
2. Refer to the table shown. The average product when eight workers are employed is _____6____
Number of workers Total Output
1 4
2 10
3 18
4 28
5 35
6 41
7 45
8 48
9 50
10 49
3. A resource is said to have a comparative advantage if
it is equally suited to the production of all goods.
its suitability to the production of one good changes as it produces more of that good.
its suitability to the production of one good does not change as it produces more of that good.
it is better suited to the production of one good than to the production of an alternative good.
4. Refer to the graph shown. Initially, the market is in equilibrium with price equal to \$3 and quantity equal to 100. Government imposes a tax on suppliers of \$1 per unit. The effect of the tax is to ?
lower the price consumers pay from \$3 to \$2.
lower the price sellers keep after paying the tax.
raise the price consumers pay from \$3 to \$4.
raise the price sellers keep after paying the tax.
5. Refer to the table shown. Diminishing marginal productivity begins when the?
fourth worker is hired.
sixth worker is hired.
third worker is hired.
fifth worker is hired
6. Refer to the graph shown. If this monopolistically competitive firm maximizes profit, it will
charge \$45 per dress.
charge \$85 per dress.
charge \$78 per dress.
shut down because it cannot cover its opportunity costs
7. The price of a ticket to a rock concert is set at \$35. All the tickets for the concert sell out 1 hour after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that
the quantity of tickets demanded is equal to the quantity supplied at the \$35 price.
the equilibrium price of tickets to the concert is less than \$35.
the equilibrium price of tickets to the concert is more than \$35.
the equilibrium price of tickets to the concert is \$35.
8. Which of the following statements is true?
Many different production processes can be economically efficient, but only the method that involves the lowest possible cost is technically efficient.
Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient.
There are many production processes that are both technically and economically efficient, but only one of these involves the lowest possible cost.
There is only one production process that is technically efficient, and this process is also economically efficient.
9. State what type of business combination is occurring in the following scenario: Samsung and Sony become partners in a flat screen manufacturing company.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
10. Suppose a firm finds that an additional dollar spent on labor increases output more than does an additional dollar spent on machines. Under these conditions, the firm
should substitute machines for labor if it wants to increase economic efficiency
is economically efficient
is technically efficient
should substitute labor for machines if it wants to increase economic efficiency
11. Economists and laypeople see the pros and cons of international trade in different ways. Which of the following is one of those ways?
Laypeople enjoy the benefits of trade in terms of lower consumer prices.
Laypeople recognize that the United States has a comparative advantage in services.
Laypeople tend to think of foreign trade only in terms of manufactured goods.
Laypeople believe in the law of one price and economists do not.
12. The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires. Suppose two companies are buying morels from workers willing to find them. One company offers to pay workers \$5.00 per pound, and the other company will pay workers only \$4.00 per pound. Economists would say that
the lower-paying company will attract the more creative and innovative pickers and the higher-paying company will attract the others.
this situation violates the law of one price and is not likely to persist.
the higher-paying company will attract the more creative and innovative pickers and the lower-paying company will attract the others.
the company willing to pay only \$4.00 has a comparative advantage in selling morels.
13. Which of the following is the best example of a macroeconomic externality?
One person saving less without considering the effect on their retirement needs
One person starting a business without knowing whether the goods will sell
Many people saving more without considering the effect on unemployment
One person spending more in order to help stimulate the economy

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