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Principles of Macroeconomics
Morgan Community College
Quiz #3
Name:
Please choose the best answer. Mark your answer by bolding the text.
1. Which one of the following items would not be considered capital by an economist?
a. A shovel used by a landscape architect
b. A cash register used at the local grocery store.
c. $10,000 corporate bond issued by Microsoft in 1995.
d. An automobile used by Hertz rent-a-car.
2. The petroleum deposits that are still in the ground in the United States is an example of
what type of factor of production?
a. Human capital
b. Physical capital
c. Labor
d. Natural resource
3. The economic resources that are used in the production of goods and services are
called:
a. Capital
b. Factors of production
c. Consumer goods
d. Natural resources
4. Which of the following best describes an investment in human capital?
a. After graduation, you decide to continue your education and undertake graduate
study
b. The university that you attend builds a new basketball arena.
c. The state government decides to build a new four-land bridge over the river
d. The electric company serving your college decides to string new lines so that you
have quicker access to electricity.
5. A country's production possibility curve shows
a. The maximum rate of growth of capital and labor in the country.
b. The maximum combination of goods and services that can be produced with
fixed resources and technology.
c. The combinations of goods and services among which consumers are indifferent.
d. The maximum amount of labor and capital available to society.
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6. Any point beyond a country's production possibilities frontier:
a. Is attainable by the country, given its current level of resources, production
technology and represents higher outputs of both goods
b. Is less efficient than any point below the frontier
c. Cannot be attained by the country, given its current level of resources and
production technology.
d. Is less desirable than any point on the curve.
7. Suppose that you heard President Obama on television make the statement: "Within the
next month, we are going to produce more butter and we will not have to reduce our
production of guns!" In order for this to happen, which one of the following would have to
be true?
a. The US is producing inefficiently, somewhere inside its production possibilities
curve.
b. The US is producing efficiently at some point on its production possibilities curve,
but it will need to move along the curve.
c. The US is producing at some point beyond its production possibilities curve.
d. The nation’s production possibilities curve shifts back toward the origin.
8. Suppose that the opportunity costs of production differ between two countries. You
would be correct if you concluded that:
a. It will not be possible for either country to gain from trading with the other.
b. If each country specializes and trades with the other, there will be an increase in
production of all commodities.
c. Each country should produce some of all goods to promote self-sufficiency.
d. Only one country has a comparative advantage.
9. If the United States has a comparative advantage in the production of wheat when
compared to the country of Egypt, then:
a. In the US, the opportunity cost of producing wheat is higher than in Egypt.
b. In the US, the opportunity cost of producing wheat is lower than in Egypt.
c. Neither the US or Egypt should specialize only in the production of wheat.
d. The US will export all of its wheat.
10. When you consider an economic system that produces only two goods, economic
growth can be illustrated by:
a. A movement along its production possibilities curve.
b. A movement of its production possibilities curve toward the origin.
c. Moving to a point inside its production possibilities curve.
d. An outward shift of its production possibilities curve.
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11. Utility is the ___________ that people derive from the consumption of goods and
services and activities that they pursue.
a. Money
b. Value
c. Weight gain
d. Friends they make
12. Which of the following would be included in labor?
a. A third grade teacher in a small rural town
b. A actress on Broadway
c. A recent college graduate who is unemployed but currently applying for jobs
d. All of the above
13. What two (2) criteria must be satisfied to consider a resource as capital?
1)
2)
14. Do all economies operate on the production possibilities curve? If no, where do they
operate? Inside or outside of the production possibilities curve?
15. Full employment means that all factors of production that are available are being used.
Can an economy be operating on the production possibilities curve without achieving full
employment?
a. Yes
b. No
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16. A production possibilities curve has two (2) distinct characteristics 1) its downward
sloping and 2) the curve is bowed out. Explain what each of these characteristics means
or shows.
a. Downward sloping
b. Bowed out curve
17. The law of increasing opportunity costs shows that as an economy moves along its
production possibilities curve in the direction of producing more of one good, the
opportunity cost of that good will
a. Increase
b. Decrease
c. Neither increase, nor decrease
Quantity of t-shirts
18. Draw a production possibilities curve for an economy that can produce two goods, tshirts and widgets. Put the quantity of t-shirts on the vertical axis and the quantity of
widgets on the horizontal axis. Now mark a point A on the curve and extend dotted lines
from this point to the horizontal and vertical axes. Explain why, in the absence of
economic growth, and increase in widgets requires a reduction in the production of tshirts. Then show how economics growth could lead to an increase in the production of
both goods.
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Quantity of widgets